Be specific on the size of the cash flows in each period

Assignment Help Financial Management

Reference no: EM132017985

The treasurer of a small bank has borrowed funds for 1 month at an interest rate of 3% and has lent funds for 3 months at 4%. The treasurer borrowed and lent 2 million dollars in t₀.

a. Represent the exposure on cash flow diagrams. Be specific on the size of the cash flows in each period.

b. Assume that the treasurer decides to wait 1 months and take a spot loan then. To cover his exposure, the treasurer signs a 1x3 FRA. (i) Use cash flow diagrams to show how this achieves his goal. Be specific on the size of the cash flows for each period (except the floating amounts, which depend on the Libor at t1). (ii) What is the settlement amount in the FRA if the forward rate is 3.5%, the Libor rate on settlement date is 4%? (iii) Now that you know the Libor rate, use it to determine the exact outflows and inflows in t₂.

Reference no: EM132017985

Questions Cloud

Make the stockholders equity section of the balance sheet : Additional paid-in capital $183,431 in 2007 and $188,389 in 2008. Prepare the stockholders' equity section of the balance sheet at December 31, 2008

How does this impact high school kids : Do you believe safe spaces are necessary on college campuses (Northwestern's approach versus University of Chicago's)? Explain.

Prepare the stockholders equity section of the balance sheet : Sold and issued 21,400 shares of the no-par common stock at $22 cash per share. Prepare the stockholders' equity section of the balance sheet at December

Discuss various ethnocentric practices historically used : Discuss various ethnocentric practices historically used by those in power that have contributed to prejudicial attitudes towards racial and minority groups.

Be specific on the size of the cash flows in each period : Represent the exposure on cash flow diagrams. Be specific on the size of the cash flows in each period.

What would genentech current ratio : In 2000, they had no short-term borrowings but they disclosed $150 million in new short term borrowing for 2001. What would Genentech's current ratio

Complete environmental analysis on the firm : Studying Polaris Industries inc provide a complete environmental analysis on the firm

What are the payments in the last three years : What are the payments in the last three years (payments 5 through 10)?

Project - enterprise network security : You need to identify what streaming the companies are doing and the specific technology they are leveraging - What are the technical vulnerabilities

User Account

All Pages