User Account

All Pages

What is the interest rate spread that ringwood bank

Assignment Help Finance Basics
Reference no: EM131419536

Please write an essay essay with in text citation, references about the following.

The Ringwood Bank raised $30 million for 4 years at a fixed interest rate of 7% and then loaned the funds to Micro-Technology Inc. The loan calls for an interest rate that changes every year. The interest rate that Micro-Technology agreed to pay is LIBOR plus 400 basis points. At the same time, Ringwood Bank entered into a 4-year interest rate swap with an investment banking firm, Goldman Sachs, with a notional amount of $30 million. The swap terms are as follows: Every year Goldman Sachs pays Ringwood Bank 7.3%; and every year Ringwood Bank pays Goldman Sachs LIBOR plus 150 basis points.

a. What is the risk that Ringwood Bank faces if it does not enter into the interest rate swap?

b. Suppose that LIBOR at a payment date is 3%, what is the interest rate spread that Ringwood Bank would realize?

c. What did Ringwood Bank accomplish by entering into this interest rate swap?

Reference no: EM131419536

Questions Cloud

How conducting regular job analyses benefits employees : Analyze how conducting regular job analyses benefits employees, managers, and the organization. Describe how this type of benchmarking can strengthen an overall job analysis plan
Increase in interest rates may impact the scenario : 1) Create a scenario where an investor would benefit from using forward and future contracts to hedge an existing risk exposure. 2) Explain how an increase in interest rates may impact the scenario you created.
How has roe changed over this period : For the three most recent years, calculate the Du Pont identity for Disney. How has ROE changed over this period? How have changes in each component of the Du Pont identity affected ROE over this period?
Sexual harrassment in the workplace : Explain the kind of reasoning you think is the best way to approach this question, and how that reasoning supports the position you think is strongest -
What is the interest rate spread that ringwood bank : a. What is the risk that Ringwood Bank faces if it does not enter into the interest rate swap? b. Suppose that LIBOR at a payment date is 3%, what is the interest rate spread that Ringwood Bank would realize? c. What did Ringwood Bank accomplish by e..
Evaluate findings and your presentation method : Evaluation methodology used and why. Evaluation findings and your presentation method and reception. Evaluation challenges (pros and cons, like ethical issues). Three most important lessons you learned as part of completing the paper.
How most employees are likely to react to the change : Suggest how most employees are likely to react to the change. Indicate one way in which you would minimize the impact of this reaction to the change management process.  Provide support for your rationale
What was fva’s cash coverage ratio for the year : Calculating the Cash Coverage Ratio FVA Inc.'s net income for the most recent year was $17,590. The tax rate was 34 percent. The firm paid $4,150 in total interest expense and deducted $5,820 in depreciation expense. What was FVA's cash coverage r..
Identify the specific details in your texts : Identify the specific details in your texts that are important in supporting your thesis and analyze the significance of these details, especially in the overall context of the larger text.

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the value of perpetuity

Calculate the value of perpetuity and With Same amount of money what rate compounded semi-annually equate when the same amount compound at quarterly rate of 5.5%

  What are the two definitions of cash and why do corporate

what are the two definitions of cash and why do corporate treasurers often use the second

  Determining the dividend payout ratio

He implemented a dividend policy that increased the dividend payout ratio from 43 percent in the early 1920s to 91 percent in 1929. However, the dividend was held constant in 1930 and 1931, even as sales and earnings decreased. This led to a payou..

  How much more is nancy cash flow worth

If the appropriate interest rate is 8 percent, how much more is Nancy's cash flow worth?

  Develop johnston market value based capital structure

Develop Johnston's market value based capital structure, and calculate its WACC. Assume equity capital comes from retained earnings, and the marginal tax rate is 40%.

  Calculate the value of this short forward contract

The risk-free rate with continuous compounding is 3% per annum, the stock price is $30 and the delivery price is $28. Calculate the value of this short forward contract.

  Turner corp has debt of 230 million and generated a net

turner corp. has debt of 230 million and generated a net income of 121 million in the last fiscal year. in attempting

  Computing implied annual interest rate

Assume the December CBOT Treasury bond futures contract has the quoted price of 89-09. The T-bond is a 20-year 6% coupon bond and interest is paid semi-annually. What is the implied annual interest rate inherent in the futures contract?

  Foreign exchange present in an organization

What specific problems does foreign exchange present in an organization? How may an organization protect itself from currency fluctuations? What are the advantages and disadvantages associated with doing so?

  Comment on the key drivers affecting the stock price

Today's dividend is $10. Expected rate of return in the market is 15% and the firm's growth rate is 12%. The firm pays out 10% of its growth as dividend. Comment on the key drivers affecting the stock price.

  Determine which items should be included in a statement of

presented below are selected financial statement items for rowe corporation for december 31 2012.inventory55000cash

  Demands are independent across the weeks orders are placed

an industrial company requires argon gas cylinders for its work. weekly demand is normally distributed with a mean of

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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