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a) Black Corp. currently has $65 million worth of floating rate debts carried at an average rate of LIBOR + 2.6% that it would like to hedge against rising interest rates without having to issue fixed rate bonds. Accordingly, they have approached Red Corp. (a swap dealer) about an 8-year interest rate swap with a notional value of $65 million. If Black can borrow in the fixed rate market at 5.15% and the swap rate is currently 2.35%, how much money will it be able to save from this arrangement each year (compared to simply issuing fixed rate bonds)?
b) What net payment is made to Black for a six month period in which LIBOR is 2.6%?
c) Briefly explain why banks do not require margin when they sell forward contracts
d) Briefly explain how Sojitz Corp. is attempting to naturally hedge its exposure to supply disruptions of rare earth elements (REEs)
Describe how to build a cash flow from an income statement.
Morningside nursing Home, a not-for-profit corporation, is estimating its corporate cost of capital. Its tax-exempt debt currently requires an interest rate of 6.2 perce
1. Motives - This section should include a detailed discussion of the main motives for the proposed acquisition supported by the latest academic literature and advances within the
a firm wishes to maintain an internal growth rate of 6.5% and the dividend payout ratio of 25%. The current profit margin is 6%, and the firm uses no external financing sources. Wh
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what is rolling budgeting?
A factoring company has offered a one-year agreement with Glub Ltd to both manage its debtors and advanced 80 per cent of the value of all its invoices immediately a sale is invoi
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The Minister of Finance decides to review the existing legislation regulating banks and non-banking entities. You have been appointed as Advisor to the Minister to work on the pro
Calculate the EAR of the following APR: a. APR at 10.8% compounded monthly. (2 marks) b. APR at 8.4% compounded quarterly. (2 marks) c. APR at 9.0% compounded semi-annually. (2 mar
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