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Commonwealth Bank of Australia has entered into an interest rate swap with Virgin Airline three year ago. Under the terms of the swap, it receives 3% per annum and pays six-month LIBOR on a principal of $5 million for five years. Payment are made every six months. However due to the travel bans and isolation requirements to prevent the spread of coronavirus, many routes are cancelled, Virgin airline is facing some liquidity issues and failed on the sixth payment when the LIBOR interest rate (with semiannual compounding) is 2.4% per annum for all maturities. What is the loss to the financial institution? Assume that six-month LIBOR was 2.5% per annum halfway through year 3. Use LIBOR for discounting.
If you have a mid-year calculation is it better to discount back an extra half year or forward a half year? Prove your assertion with the following example:
Kumar has deposited RM3,500 in a bank account which pays 4% per year compounded monthly. How much will he have at the end of 4 years?
What is their present value to you? Round your answer to the nearest cent.
What are some of the techniques that can be used to adjust for these differences?
A family of four with a monthly after-tax income of $5150 spends 90% of its earnings and saves the money for the down payment on a house
If you were preparing an amortization schedule, what would be the ending balance after your first payment (i.e. at the end of the first month)?
What is trial balance? Explain in detail with an example if possible
What treatment will such financial assets get in the financial statements in accordance with US GAAP and IFRS standards?
What are the relevant cash flows? How do they change if the market price of the machine is $600,000 instead?
If the dollar per british pound is $1.6124 and yen per dollar is 119.89 yen, what is the cross rate between Japanese yen and British pound?
Changing machines in a world without taxes The Clampton Company is considering the purchase of a new machine to perform operations currently being performed.
It is desired to use a 0.75-m diameter beach ball to stop a drain in a swimming pool. Obtain an expression that relates the drain diameter D and the minimum water depth h for which the ball will remain in place.
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