Company X wants to bonow $10,000,000 floatng for 5 years & company Y wants to borrow $10,000,000 fxed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectivety Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectivety. A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR -0.15 percent, in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fxed rate of 9.90 percent. Y will pay the Swap bank interest payments on $10,000.000 at a foxed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 wth the coupon rate of LIBOR-0.15 percent Assume yield is 5%, phat is the net present value of this swap to the swap bank, to nearest dolar?

Company X wants to bonow $10,000,000 floatng for 5 years & company Y wants to borrow $10,000,000 fxed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectivety Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectivety. A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR -0.15 percent, in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fxed rate of 9.90 percent. Y will pay the Swap bank interest payments on $10,000.000 at a foxed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 wth the coupon rate of LIBOR-0.15 percent Assume yield is 5%, phat is the net present value of this swap to the swap bank, to nearest dolar?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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