User Account

All Pages

Agreement to pay floating rate and receive fixed rate

Assignment Help Financial Management
Reference no: EM131552278

Buyer Limited design to sign an interest rate swap agreement to pay a floating rate and receive a fixed rate. The swap contract can help Buyer Limited to convert $100 million, 4.6% fixed interest rate bond into a floating rate payment. The floating rate is indexed to the six-month LIBOR minus 0.52%.

(a) Explain why Buyer Limited use a swap agreement rather than issue a floating-rate bond?

(b) Determine the net cash flow to Buyer Limiter when the LIBOR is 5% at the interest payment settlement date.

Reference no: EM131552278

Questions Cloud

Shareholders expectation on their expectation : What is the minimum growth rate this company needs to achieve to satisfy the Shareholders’ Expectation on their expectation?
Define the net present value : A machine can be purchased for $1 million. The cost of capital is 10%. What is the net present value?
Company capital structure and other financial information : It is assumed that this company will stop its growth in 10 years. If it sells to other company at that time, how much should it ask for
Disadvantages of issuing convertible bonds : What are the advantages and disadvantages of issuing convertible bonds?
Agreement to pay floating rate and receive fixed rate : uyer Limited design to sign an interest rate swap agreement to pay a floating rate and receive a fixed rate.
When using convertible bond as a way of raising finance : What are the factors to be considered when using convertible bond as a way of raising finance?
What set of weights yields a portfolio with zero variance : Stock A has an expected return of 10% and a standard deviation of 10%. What set of weights yields a portfolio with a zero variance?
Risk free rate and market risk premium : If the risk free rate is 5 percent and the market risk premium is 7 percent, are these stocks correctly priced.
Mid-twenties and a moderate conservative investor : Determine where you are personally in your financial goals as someone in their mid-twenties and a moderate conservative investor.

Reviews

Write a Review

Financial Management Questions & Answers

  What would be before-tax component cost of debt

KatyDid Clothes has a $110 million (face value) 25-year bond issue selling for 102 percent of par that carries a coupon rate of 8 percent, paid semi annually. What would be Katydid’s before-tax component cost of debt?

  What would be the total market value of the firm

If the company makes this change, what would be the total market value (in millions) of the firm?

  Various school and living expenses

Pete Morton is planning to go to graduate school in a program of study that will take 3 years. Pete wants to have $16600 available each year for various school and living expenses. If he earns 6 percent on his money, how much must be deposit at the s..

  The standard deviation of stock returns for stock

The standard deviation of stock returns for Stock A is 25%. The standard deviation of the market return is 15% and the correlation between Stock A and the market is 0.75. Calculate Stock A's beta. In a bull market with rapidly increasing stock prices..

  Compute the value of the average collection period

Oral Roberts Dental Supplies has annual sales of $5,200,000. Ninety percent are on credit. The firm has $550,000 in accounts receivable. Compute the value of the average collection period

  Assignment brief financial management assignmentnbsp1

assignment brief financial management assignment.nbsp1. critically evaluate the role and function of finance including

  Covered call by buying one share of a stock

An investor writes a covered call by buying one share of a stock at $50 and selling a European call option on the stock with strike price $55 at $1.25. What is his profit if he holds his position until maturity of the option and the stock price is $4..

  Treasury bill-reasonable annualized risk-free rate

Suppose that US Treasury Bills have seven days left until maturity, have a face value of $75,650, and have a quoted YTM of 5%. What would be a reasonable annualized risk-free rate that could be derived from this US Treasury Bill?

  Using single-period binomial model

Find out the price of a put option based on a stock currently priced at $40, and will be either $50 or $32 in one year. This put option has an expiration date in one year with strike price of $38. The risk free rate is 6%. (Hint: using single-period ..

  What return do the stockholders stock require

A CEO wants to maintain a target debt to equity ratio of 0.25. The overall WACC for the company is 18.6% and the cost of debt is 8.4% before tax. Assuming a tax rate of 34%, what return do the stockholders' stock require?

  Requires initial fixed asset investment

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sale..

  What is the bid–ask spread as percentage of par

Locate the Treasury bond in Figure 7.4 maturing in August 2026. Is this a premium or a discount bond? Premium bond Discount bond What is its current yield? What is its yield to maturity? What is the bid–ask spread as a percentage of par?

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