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.
Q. What are Sources of Finance? No details are specified concerning the nature of a business to comment on and hence only general recommendations can be made. Given that fixed
Q. Report on bank's predicts of exchange rates? Report on banks' predicts of exchange rates. The three banks have produced extensively differing forecasts which even involve
GENERAL FUNCTIONS Several functions of financial management currently range from planning of funds to distribution of earnings and also are extend beyond. Some of the well-kn
COMPOUNDING TECHNIQUE is the method of calculating the future values of cash flows and involves calculating compound interest. Under this process, interest is compounded when the
North Star Company, a U.S. based MNC, is considering to establish a subsidiary to capitalize on the removal of Eastern European border restrictions. The subsidiary would manufactur
I need help working through this problem. What is the stock price of Firm X when provided the following information? Beta – 1.42 MRP – 10% Rf – 3% G – 4% Dividend next period-
when asked to calculate return method given cash flow before depreciation how do you do it
Stabilization Policies in the AA-DD Model. Suppose the economy of Zion has reached the long run equilibrium (i.e. full employment). Now assume that a best-seller, written by Ne
Why is it important to study international financial management? Answer: We are now living in a world in which all the main economic functions, that are production, consumption,
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