Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Alpha and Beta Companies can borrow at the subsequent rates.
Alpha Beta
Moody's credit rating Aa Baa
Fixed-rate borrowing cost 10.5% 12.0%
Floating-rate borrowing cost LIBOR LIBOR + 1%
1. Calculate the Quality Spread Differential (QSD).
2. Develop an interest rate swap in which both Alpha and Beta have an equal cost savings in their borrowing costs. Suppose Alpha desires floating-rate debt and Beta desires fixed-rate debt.
Solution:
1. The QSD = (12.0% - 10.5%) minus (LIBOR + 1% - LIBOR) = .5%.
2. Alpha requires to issue fixed-rate debt at 10.5% and Beta requires to issue floating rate-debt at LIBOR + 1%. Alpha requires to pay LIBOR to Beta. Beta requires to pay 10.75% to Alpha. If this is completed, Alpha's floating-rate all-in-cost is: 10.5% + LIBOR - 10.75% = LIBOR - .25%, a .25% savings over issuing floating-rate debt on its own. Beta's fixed-rate all-in-cost is: LIBOR+ 1% + 10.75% - LIBOR = 11.75%, a .25% savings over issuing fixed-rate debt.
CHARACTERISTICS AND EFFECTS OF SAPS Although SAPs differ somewhat from country to country, they typically have the following features: Reduction in Trade Barriers SAP’s r
Assume that you work with a large financial consulting firm. You are one of the junior financial consultants there specializing in IPO issue. A team of foreign investors has recent
How are foreign exchange transactions between international banks settled? Answer: a network of correspondent banking relationships is known as the interbank market with large c
DEFINITION OF FINANCIAL MANAGEMENT The term financial management has been described by management experts in several ways reflecting the duties and responsibilities of a financ
Part 1: Contingency plan Create contingency plans for the following scenarios: > One of your highly qualified consultants has given three months notice and is planning to move to a
Outsourcing Outsourcing is referring to purchase of parts from outside suppliers. Outsourcing is the external acquisition of services or components used in the production of go
QUASI-INSTRUMENTS These instruments are considered as debt instruments for a time-frame and are converted into equity at the option of the investor (or at company's option) aft
What is GATT, and what is its goal? GATT is also termed as General Agreement on Tariffs and Trade. It is a treaty which seeks to decrease trade barriers among participant nation
What is Public Finance Central, state as well as local governments handle large sums ofmoney, which are received from several sources and should be utilized in accordancewith
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd