Q4Aptim Finance Company, has accepted 3 year deposits frompublic to the tune of Rs. 200 crore at a cost of 16% anddeployed the funds for a 3 year term at a floating rate of 5%above 364 day T-bill rate. Sheetal Leasing Ltd. has accessedthe market for Rs. 200 crore with a 3-year floating rate bond,the interest on which is 3% above 364 day T-bill rate. Thesefunds are deployed in a 3-year asset which gives a yield of19.5%.The 364 day T-bill rate turned out to be as under for each ofthe half-yearly payment of interest.Time Period 364 day T-bill rate6 month12 month18 month24 month30 month13.98%14.10%14.20%14%13.95%36 month13.75%1) Arrange a Swap transaction so that Aptim Financeearns a spread of 4%.2) At the end of 3 years swap arrangement, who isbenefitted by the swap arranged by you on terms of thespread (compare swap versus no swap positions)?

In this question we will be evaluating the SWAP arrangement of Aptim Fianance Company.

Aptim Finance Company, has accepted 3 year deposits from public to the tune of Rs. 200 crore at a cost of 16% and deployed the funds for a 3 year term at a floating rate of 5% above 364 day T-bill rate. Sheetal Leasing Ltd. has accessed the market for Rs. 200 crore with a 3-year floating rate bond, the interest on which is 3% above 364 day T-bill rate. These funds are deployed in a 3-year asset which gives a yield of 19.5%.

Aptim Finance Company, has accepted 3 year deposits from public to the tune of Rs. 200 crore at a cost of 16% and deployed the funds for a 3 year term at a floating rate of 5% above 364 day T-bill rate. Sheetal Leasing Ltd. has accessed the market for Rs. 200 crore with a 3-year floating rate bond, the interest on which is 3% above 364 day T-bill rate. These funds are deployed in a 3-year asset which gives a yield of 19.5%.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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