Determine rates that company enter into a $/£ currency swap, Financial Management

Assignment Help:

Suppose a company is quoting swap rates as follows:  7.75 - 8.10 percent yearly against 6-month dollar LIBOR for dollars and 11.25 - 11.65 percent yearly against six-month dollar LIBOR for British pound sterling. At what rates will company enter into a $/£ currency swap?

Solution: Company will pay annual fixed-rate dollar payments of 7.75 percent against receiving 6-month dollar LIBOR flat, or it will receive fixed-rate annual dollar payments at 8.10 percent in opposition to paying six-month dollar LIBOR flat.  Morgan Guaranty will create annual fixed-rate £ payments at 11.25 percent in opposition to receiving six-month dollar LIBOR flat, or it will receive yearly fixed-rate £ payments at 11.65 percent against paying six-month dollar LIBOR flat. So, Morgan Guaranty will enter into a currency swap in which it would pay yearly fixed-rate dollar payments of 7.75 percent in return for receiving semi-annual fixed-rate £ payments at 11.65%, or it will receive annual fixed-rate dollar payments at 8.10 percent in opposition to paying annual fixed-rate £ payments at 11.25 percent.


Related Discussions:- Determine rates that company enter into a $/£ currency swap

Changes in liquidity risk, Liquidity risk tends to change as and when...

Liquidity risk tends to change as and when there exists a change in the spread between the bid and the ask price. Market liquidity change is a matter of concern f

What is suspension of payments, Is it possible for a company with a positiv...

Is it possible for a company with a positive net income and which does not distribute dividends to find itself in suspension of payments?  Yes. A lot of companies which entered

Define weight refer to in weighted average cost of capital, What does the “...

What does the “weight” refer to in the weighted average cost of capital? The weight considered to in weighted average cost of capital consider the portion of the total capital in

Features and purpose CDs , The distinct features of CDs are: CD is a ...

The distinct features of CDs are: CD is a document of title to a time deposit and is distinct from conventional time deposit with respect to negotiability and marketability.

Cash flow statement ratios, Cash Flow Statement Ratios: This ratio, wh...

Cash Flow Statement Ratios: This ratio, which is defined as a percentage, compares a company's operating cash flow to its total sales or revenues, which provide investors an i

Portfolio duration, We can measure the portfolio duration by calculat...

We can measure the portfolio duration by calculating the weighted average of the duration of the bonds in the portfolio. The proportion of the portfolio that a se

Microsoft''s Partenership Strategies, I have a presentation to give on ''Ne...

I have a presentation to give on ''New ways'' Microsoft can improve its ''Partnership Strategies''. Can some one please give some good links or insights into the same.

Assets, Assets Pension insurance companies' assets can be divided into ...

Assets Pension insurance companies' assets can be divided into five main investment classes: cash, long-term bonds, stocks, property and loans. The total returns on the assets

Explain some examples under fasb 52, Explain some Examples under FASB 52 th...

Explain some Examples under FASB 52 that a foreign entity's functional currency would be similar as the parent firm's currency. Answer:  Three instances under FASB 52, in which

Explain about the corporate reorganisations, Corporate Reorganisations ...

Corporate Reorganisations This topic deals principally with mergers and takeovers. It's very highly examinable. The discussion areas overlap with business strategy paper so don

Write Your Message!

Captcha
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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd