What is the net payment received by investor every six month

Assignment Help Finance Basics

Reference no: EM133616950

Problem: An investor owns a $10 million par value of a 7.85%, 5-year bond of a BBB rated corporation, purchased at par value. The coupon payments are semiannual. At the same time, the investor enters into a 5-year interest-rate swap with a dealer, where the investor pays a fixed rate and receives 6-month LIBOR. Assume the fixed swap rate is 7.00%. What is the net payment received by the investor every six months, assuming the issuer does not default and there is no change in the 6-month LIBOR? If the swap rate in the market changes to 7.30% instead of 7.00%, and the investor sells the bond to the dealer at par value entering an asset swap agreement to pay semiannually at 7.30% and receive 6-month LIBOR plus 30 basis points, what would be the net payment received by the investor every six months?

Reference no: EM133616950

Questions Cloud

Explore the history of publicly funded catholic schools : Define religious decrimination within this context,, Explore the history of publicly funded Catholic schools and their admission policies.

Micro-range nursing theory : Define and/or describe grand, middle range, and micro-range nursing theory. For each type of theory, give one theorist and his or her theory as an example.

Compute the undiscounted payback periods of the two projects : Year Apple Project Orange Project 0 -$100 -$200 1 $75 $100 2 $50 $150. Compute the undiscounted payback periods of the two projects.

What new insights do these descriptive statistics : What new insights do these descriptive statistics provide concerning Asia-Pacific business schools

What is the net payment received by investor every six month : What is the net payment received by the investor every six months, assuming the issuer does not default and there is no change in the 6-month LIBOR?

Make your presentations more effective and dynamic : effective or ineffective use of one or more of the course concepts (e.g. unique delivery style, effective structure or development, use of storytelling

Does toni morrisons story life of a black woman enslavement : Does Toni Morrison's story the life of a Black woman during enslavement and after Emancipation represent a look into "black hole" of African American trauma?

How do you know if you have enough money for upcoming bill : How do you know if you will have enough money for an upcoming bill? How do you plan for variable expenses, such as a vacation or gifts?

Provide a short description of the job : Provide a short description of the job title including: Education and training required for this job. Current employment trends for this career

User Account

All Pages