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Suppose IBM would like to borrow fixed-rate yen, whereas Korea Development Bank (KDB) would like to borrow floating-rate dollars. IBM can borrow fixed-rate yen at 4.75% or floating-rate dollars at LIBOR + 0.35%. KDB can borrow fixed-rate yen at 4.90% or floating-rate dollars at LIBOR + 0.75%.
(a) What is the range of possible cost savings that IBM can realize through an interest rate/currency swap with KDB?
(b) Assuming a notional principal equivalent to $125 million and a current exchange rate of 105/$, what do these possible cost savings translate into in yen terms?
(c) Redo parts a and b assuming the parties use Bank of America, which charges 8 basis points to arrange the swap.
Estimate the value of leased assets. If you misestimate the average life to be 10 years, how large will the valuation error be?
Mc Donalds corp. preferred stock pays an annual dividend of $5 per share. Calculate the value of one share to an investor who requires a rate of return of : Calculate the yield of the Mc Donalds corp preferred stock of problem 13 if its market price ..
You have found a project that will produce an annual income of $125,000 at the end of first year. This annual income will increase by 5 percent annually for 7 years. What is the value of this project in today's dollars if you can earn 12% on your inv..
Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.6% versus zero on T-bonds, and the ..
Consider the following project which costs $2,000 with a salvage value of zero in 4 years. The project will produce a new widget which will be sold for $135 and have variable costs of $95 per unit. The company has fixed costs of $3,000 and a required..
What action(s) would the Fed take if inflation is too high? What would it do if the unemployment rate is too high? What would it do if both inflation and unemployment rates are too high?
What are the key activity areas for securities firms? How does each activity area assist in the generation of profits and what are the major risks for each area?
The U. S. experienced an inflation rate of 4 percent last year while Spain's inflation last year was 2 percent. Based on purchasing power parity, the euro will:
A firm had a ledger balance of $4,122 with no outstanding deposits or checks. Today, your firm deposited 4 checks in the amount of $466 each and wrote a check in the amount of $969. What is the amount of the collection float as of the end of the day?
Your firm has an average receipt size of $120. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,400 checks per day. The daily interest rate is .017 percent. What..
Price A bond with a $1,000 par value pays a coupon of $40 every six months. The bond has 12 years until maturity and a required return of 8%. Calculate the bond’s price. If the required return suddenly dropped to 6%, what would be the percentage chan..
A few years ago Spider web inc issued with a 11.79 percent annual coupon rate paid semiannually. The bonds have a par value of $1,000 a current price of $702 and will mature in 23 years. What would the annual yield to maturity be on the bonds if you ..
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