What the rate each party will pay and receive from dealer

Assignment Help Financial Management
Reference no: EM131341470

Explain how the following scenarios should be resolved: Murrays can borrow money at a fixed rate of 10.5 percent or a variable rate set at prime plus 2.25 percent. Fred’s can borrow money at a variable rate of prime plus 1.5 percent or a fixed rate of 12 percent. Murrays prefers a variable rate and Fred’s prefers a fixed rate. The swap dealer will take a 1.5 percent profit. Specify what the rate each party will pay and receive from the dealer and how each dealer will lock in their profit. please show work

Murray:

Pay

Receive

Savings

Fred:

Pay

Receive

Savings

Dealer:

Pay to Murray

Receive from Murray

Profit

Pay to Fred

Receive from Fred

Profit

Reference no: EM131341470

Questions Cloud

Implementing pst - developing your own pst program : Implementing PST - Developing Your Own PST Program, Purpose: To develop a PST program for your athletes/students. You may choose the PST skills specific to your athletes'/students' needs
Describe slow-wave sleep and rem sleep : Describe slow-wave sleep and REM sleep. Describe the brain activity that takes place during these two stages. Describe what an EEG recording looks like during each of these two stages
Identify the method of reinforcement being used : Identify the behavior that the mom is trying to reinforce. Identify the behavior that the mom is trying to reinforce. Identify the method of reinforcement being used
Why is there tension between researchers and practitioners : Why is there tension between researchers and practitioners? What is the point of researching people's behavior if the knowledge is not used to help those in need
What the rate each party will pay and receive from dealer : Explain how the following scenarios should be resolved: Murrays can borrow money at a fixed rate of 10.5 percent or a variable rate set at prime plus 2.25 percent. Fred’s can borrow money at a variable rate of prime plus 1.5 percent or a fixed rate o..
What price must you expect evco stock : Assume? Evco, Inc. has a current stock price of $45.91 and will pay a $1.75 dividend in one? year; its equity cost of capital is 14%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justif..
Bushels of corn for your production operations : You need 70,000 bushels of corn for your production operations next month. The futures contracts on corn are based on 5,000 bushels and are currently quoted at 514 cents per bushel for delivery next month. If you want to hedge your cost, how many con..
Home currency approach and uncovered interest parity : Lakonishok Equipment has an investment in Europe. The project costs €9.5 million and is expected to produce cash flows of €2.7 million in year 1, €3.1 million in year 2, and €2.8 million in year 3. The current spot rate is $1.23/€. In addition, the s..
Estimated the cost of the brazilian trip : You are debating between spending a week in Brazil or a week in Chile. You've estimated the cost of the Brazilian trip at 56,300 reals and the Chilean trip at 13.6 million pesos. The currency per U.S. dollar is 2.5658 reals and 609.10 pesos. If you p..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Which stock would be more attractive to diversified investor

Stock X has a 10% expected return, a beta coefficient of 0.9 and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. The risk-free rate is 6%, and the market risk..

  Bank liquidity management on the liability side

Bank liquidity management on the liability side of the balance sheet is normally carried out in the ________ market. (Remember that markets for fixed income instruments differ depending on the maturity of the instrument being traded.)

  Calculate the time value for a buyers call

Suppose that the market price of a stock is up to $37.00 and an investor has $550 worth of 100 shares with the strike price of a call at $33.00. Calculate the time value for a buyer's call.

  Compact fluorescent lamps have become more popular

Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.52 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $..

  In the market-the rate of return of the risk free asset

Suppose in the market, the rate of return of the risk free asset is 10%. The tangency portfolio has an expected rate of return of 20% and a standard deviation of 20%. In a mean-standard deviation graph, show all possible portfolios of risky asset, th..

  About the weighted average cost of capital

Pine Tree Farms Corporation (PTFC) has a target capital structure of 20% debt, 10% preferred stock, and 70% common equity. Currently PTFC has a capital structure of 70% debt, 10% preferred stock, and 80% common stock. What is PTFC’s weighted average ..

  Calculate the hpr and profit amount on equity position

On March 20, 2012 you bought 1,000 shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) at $14.00 on 50% margin. The margin loan carries a 8% annual interest rate, paid every 3 months from the day of the purchase. Calculate the HPR (%) and profit..

  What is the firms required rate of return

ABC Company's stock has a beta of 1.32, the risk-free rate is 5.25%, and the market risk premium is 5.50%. What is the firm's required rate of return?

  Equity fund with an expected risk premium

You manage an equity fund with an expected risk premium of 12.8% and a standard deviation of 42% The rate on Treasury bills is 3.4% Your client chooses to invest $75,000 of her portfolio in your equity fund and $75,000 in a T-bill money maiket fund W..

  Advantage for share repurchases versus dividends

Describe why the way in which they distribute cash flow does not affect value, in perfect markets. Demonstrate how taxes can create an advantage for share repurchases versus dividends. Why are firms in different industries and countries have differen..

  What would be the stock price in five years if the P-E ratio

Kellogg Co. (K) recently earned a profit of $2.52 earnings per share and has a P/E ratio of 19.86. The dividend has been growing at a 5 percent rate over the past few years. If this growth rate continues, what would be the stock price in five years i..

  Energy efficiency the same thing as economic efficiency

Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of gasoline. They estimated that in mass production the car would cost $40,000 per unit to build. In your opinion, is energy ef..

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