Determine your cash flow as a percent of notional principal

Assignment Help Risk Management
Reference no: EM13925875

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.

Reference no: EM13925875

Analyze the type of project learning that is addressed

Examine the levels of uncertainty and complexity for the project. Analyze the type of project learning that is addressed. Justify your response. Examine the organizational min

Analyze a security risk issue

A risk cube is a tool that is used to analyze a security risk issue. For example, consider the challenge to measure security concerns for a direct-recording electronic (DRE)

Different approaches to assigning probabilities

Consider the different approaches to assigning probabilities to "acts of God." Which of the approaches will you be most inclined to choose and why? Which of those approaches

What do you think are the causes of problems

What would you suggest they do differently to eliminate these problems - who should be responsible for quality? What would you recommend be the specific responsibilities of ea

Discharge planning for stroke patients

An acute care hospital has found that having geriatric nurse specialists take charge of discharge planning for stroke patients reduces length of stay from 5.4 days to 5.2 da

Explain the relationship between risk and return

Explain the relationship between risk and return? Identify an example of risk and return. Explain which is more risky bonds or common stock Explain how understanding risk and

Distinguish between recourse and nonrecourse financing

Distinguish between recourse and nonrecourse financing. Give an example of each. Should the investor select the origination LTV that maximizes the expected return on equity? E

How a firm can use swaptions to achieve the desired result

Explain how a firm can use swaptions to achieve this desired result. Also, identify and compare an alternative method that can be used to convert fixed-rate debt to floating


Write a Review

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd