Which it swaps variable rate payments of libor plus

Assignment Help Financial Management

Reference no: EM131180016

Argus Equipment Corp. has just issued fixed rate debt at 9.75 percent. Yet, it prefers to convert its financing to incur a floating rate on its debt. It engages in a three-year interest rate swap in which it swaps variable rate payments of LIBOR plus 1.25% in exchange for receiving fixed payments of 9.75%. The interest rates are applied to an amount that represents the principal from its recent debt issue in order to determine the interest payments due at the end of each year for the next three years. Argus expects that the LIBOR will be 8.5% at the end of the first year, 8.0% at the end of the second year, and 7.5% at the end of the third year. Determine the financing rate that Argus expects to pay on its debt in each of the three years after considering the effect of the interest rate swap.

Reference no: EM131180016

Questions Cloud

Greatest personal obstacles to obtaining funds : Assume that you are starting a business for the first time. - What do you belim are the greatest personal obstacles to obtaining funds for the new venture? Why?

Counting variable by a factor of two in cycle : Write a for loop that prints the values 1 2 4 8 16 32 64 by increasing the value of a counting variable by a factor of two in each cycle.

Different predictions of income development : What impact would the different predictions of income development, inflation rate development and tariff rate development have on the potential demand of Schmeckt Gut?

Explain the concepts of information systems security : Describe the principles of risk management, common response techniques, and issues related to recovery of IT systems. Describe how malicious attacks, threats, and vulnerabilities impact an IT infrastructure.

Which it swaps variable rate payments of libor plus : Argus Equipment Corp. has just issued fixed rate debt at 9.75 percent. Yet, it prefers to convert its financing to incur a floating rate on its debt. It engages in a three-year interest rate swap in which it swaps variable rate payments of LIBOR plus..

Explain whether this policy a good idea : Hughes Paint is considering enacting a policy that will forbid all but security analysts to posses and use security tools such as scanning tools, password crackers, disassemblers, sniffers, and code analyzers.

Determine how nearly into the wind the rotorship could sail : Two 15-m high rotors 3 m in diameter are used to propel a ship. Estimate the total longitudinal force exerted upon the rotors when the relative wind velocity is 25 knots, the angular velocity of the rotors is 220 revolutions per minute and the win..

Assuming the expected cash flows and cost of capital : Assuming the expected cash flows and cost of capital you use in arriving at your estimate of the maximum value of the company is accurate, do you think a foreign investor should use the same cash flows and cost of capital?

Business case for the course project : Submit a business case proposal, which is a summary of your selected business case for the course project. The business case proposal will be submitted as a Word document and in paragraph form. This business case proposal provides your instructor ..

User Account

All Pages