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A corporation has issued a $16 million issue of floating-rate bonds on which it pays an interest rate 0.8% over the LIBOR rate. The bonds are selling at par value. The firm is worried that rates are about to rise, and it would like to lock in a fixed interest rate on its borrowings. The firm sees that dealers in the swap market are offering swaps of LIBOR for 5%. A swap arrangement converts the firm’s borrowings to a synthetic fixed-rate loan. What interest rate will it pay on that synthetic fixed-rate loan?
Suppose the current exchange rate between German Mark and US dollar is M 1.5581 per $, and the 90 days forward rate between these currencies is M 1.5493 per $. Which of the followings would impact the rating of a bond?
what is the maximum price (per bulb) the engineer should be willing to pay to switch the new bulb?
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.9%. Vandell's free cash flow (FCF0) is $2 million ..
The number of new shares that Kinston must issue to raise the capital needed to pay its debt obligation is closest to:
Weyman Z. Wannamaker is the chief financial officer of Cogburn Company. He prides himself on being able to manage the company’s cash resources to minimize the interest expense. Consequently, on the second business day of each month, Weyman pays down ..
Assume you have a two-stock portfolio. How does the correlation coefficient, ρ, between the two stocks’ returns impact the standard deviation of this portfolio? Explain your answer. (Hint: The two variables under discussion are ρ and σP.)
Assume the credit terms offered to your firm by your suppliers are 3.1/6, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. The effective annual cost of the trade credit is ______%. (Round to t..
Mr. Blochirt is creating a college investment fund for his daughter.
Assume that the Federal Reserve injects $2 billion into the financial system. If the reserve requirement is 18%, what is the maximum increase in money supply? Why might the maximum increase not be achieved?
How many tickets will the planner need to sell in order to break-even?
The dollar required return is 12 percent per year, and the current exchange rate is SF 1.12. The going rate on Eurodollars is 5 percent per year. It is 4 percent per year on Euroswiss. Use the approximate form of interest rate parity in calculatin..
Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. What ..
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