Derivatives, Financial Accounting

On April 10, ABC inc. Enters in a swap contract for 10 years with a chartered bank to turn a fixed rate on liability of $150 million to floating rate. ABC wants to receive interest payments at a fixed rate in exchange for interest payments at a floating rate. The floating reference to the Canadian market is the bankers'' acceptance rate 6 months. Given the average rate that you will find in the worksheet, calculate:
a) Explain briefly why such swap transforms a fixed rate liabilities of ABC inc. in floating rate liabilities.
b) The value of cash flows that ABC pays to the financial institution (Table 7.2 in your textbook should help).
c) The value of the cash flows that ABC receives from financial institution.
d) The net cash flows received (paid) by ABC.
Posted Date: 4/1/2014 12:05:19 PM | Location : Canada







Related Discussions:- Derivatives, Assignment Help, Ask Question on Derivatives, Get Answer, Expert's Help, Derivatives Discussions

Write discussion on Derivatives
Your posts are moderated
Related Questions
Necessary things for Receivership If no power to appoint a receiver is given by the terms of issue, the trustee for the debenture holders, or a debenture holder acting on behal

Verizon Corporation has 55% equity and 45% debt (market values) in its capital structure. The pretax cost of debt is 7%, and that of equity 12%. The total value of the company is $

Suppose you get a cash bonus of Rs.1, 00,000 that you deposit in a bank that pays 10 % annual interest. How much can you withdraw yearly for a period of 10 years? Solution :

You were recently hired by E&T Boats, Inc. to assist the company with its financial planning and to evaluate the company's performance.  E&T Boats, Inc. builds and sells boats to o

Question 1 Explain the five accounting concepts with an example Separate entity concept Going concern concept Money measurement concept Cost concept Dual aspect

The following question are based on above table:- Question 1 What is the change in net working capital from 2009 to 2010? Question 2 What is net capital spending for 20

a) What will be the value of every of these bonds when the going rate of interest is 12%? Suppose that there is only one more interest payment to be made on Bond S. Round your answ

Q. Explain about Credit-worthiness? There are a numerous ways in which Fenton Security plc could ensure that customers are subjected to tighter credit appraisal checks before g

KAM Computer Timeshare Company entered into the following transactions durnig May 2014 Decribe the effects of each transaction on assets, liabilities, and owner's equity. 1. Purcha

explain the terms recording,classifying,summarizing and communicating