What is the present value of this perpetuity on the date

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1. A US company may borrow USD funds at Libor plus 1%. In the EUR market, it can raise fixed-rate financing at 3%. It may also access a currency swap that is quoted as: Fixed EUR 3.0-3.2% vs Floating USD Libor. The cheapest rate at which the company can borrow floating dollar funds is: (the USD rate is the Libor plus 1 %)

A. Libor - 0.2%

B. Libor

C. Libor + 0.2%

D. Libor + 1%

2. A perpetuity will pay 2500 per year starting five years after the perpetuity is purchased. What is the present value of this perpetuity on the date that it is purchased, given that the interest rate is 5%. Show all working.

Reference no: EM132036625

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