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You are a pension fund manager who anticipates having to pay out 8 percent (paid semi-annually) on $100 million for the next seven years. You currently hold $100 million of a floating-rate note that pays LIBOR þ 2 1/2 percent. You view this as an attractive investment but realize that if LIBOR falls below 5 1/2 percent, you will not have enough cash to make your fixed payments. You arrange a swap with a dealer who agrees to pay you 6 percent fixed, while you pay it LIBOR. Determine your cash flow as a percent of the notional principal at each payment date under this arrangement. Assume for simplicity that each period is 180 days and that there are 360 days in the year.
You've been hired by an unprofitable firm to determine whether it should shut down its unprofitable operation. Provide a report to management of the firm as to whether or not
How would you use money market instruments (borrowing and lending) to profit? Which alternatives (forward contracts or money market instruments) would you prefer? Why?
The following accounts: Net Revenues, Operating Profit, Capital Expenditures, Total Assets, Depreciation and Other Amortization and Amortization of Other Intangible Assets
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5000 on which it pays interest of 10% each year. Both companies have identical projects that gene
The earth mover would have no effect on revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor. The firm"s marginal tax r
Assume that an investment is forecasted to produce the following returns: a 10% probability of a $1,400 return; a 50% probability of a $6,600 return; and a 40% probability o
There are several forms of Business Organizations available in the US. Which forms would be most advantages to which Health services organizations, and why? In your comments
In 250 to 350 words, describe foreign exchange risk and provide an example that examines how foreign exchange rates could cause a loss to the firm.
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