None Consider an equity swap where the notional amount is $5 million, and the equity leg isbased on the return of an equity index, which is expected to be 8%. The floating rate legis based on 6-month LIBOR, which is currently 2.5%, and the swap lasts for One year.The discount rate for present value calculations is 2.5%. Calculate the value of theequity swap.

To calculate the value of the equity swap, we'll need to determine the value of both legs of the…

Answered: Consider an equity swap where the…

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

See similar textbooks

Similar questions

Suppose that at the present time, one can enter 5-year swaps that exchange SOFR for 4%. An off-market swap would then be defined as a swap of SOFR for a fixed rate other than 4%. For example, a firm with 8% coupon debt outstanding might like to convert to synthetic floating- rate debt by entering a swap in which it pays SOFR and receives a fixed rate of 8%. What up- front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $110 million. Note: Do not round intermediate calculations. Round your final answer to the nearest dollar amount. X Answer is complete but not entirely correct. Up-front payment 2,174,000 X $
Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 7% coupon debt outstanding might like to convert to synthetic floating-rate debt by entering a swap in which it pays LIBOR and receives a fixed rate of 7%. What up-front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $10 million.
Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 11% coupon debt outstanding might like to convert to synthetic floating-rate debt by entering a swap in which it pays LIBOR and receives a fixed rate of 11%. What up-front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $95 million. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)
Suppose we are pricing a five-year Libor-based interest rate swap with annual resets (30/360 day count). The estimated present value factors are given below: Maturity(years) Present ValueFactors1 0.9900992 0.9778763 0.9651364 0.9515295 0.937467 What is the fixed rate of the swap? Answer in 4 decimal places
Suppose the three-year swap rate for a swap with annual payments is 3.2% and that OIS (risk-free) zero rates for maturities of one, two and three years are 2.5%, 2.7% and 2.9% respectively. What is the value of a three-year swap where 4% is received and TSOFR is paid on a principal of $100 million? All rates are annually compounded.
Nikul
For an interest rate swap, if i have 7-year floating rate of 4% and a 7 year fixed rate of 5.4% and both loans are valued at 12 million. How do I find the value of the swap? NPV or PV.
Please correct answer and don't use hand rating
Use the data from Q5, and given the following annualized interest rates: r(30) = 4.0%; r(120) = 4.5%; r(210) = 5.0%, and; r(300) = 5.5% sixty days after the initiation of the pay-fixed swap. If the pay-fixed and receive-floating swap is to mark-to-the-market now, who pays whom and how much? Use $5m notional principal. Pay-fixed leg pays $24,214.41 to pay-floating leg. Pay-floating leg pays $24,214.41 to pay-fixed leg. Pay-fixed leg pays $25,455.45 to pay-floating leg. Pay-floating leg pays $25,455.45 to pay-fixed leg.
PLease use actuarial science work to solve this question. The answer is (a) 0.1774, (b) 0.2124, (c) 0.3020 Thank you so much.
Vijay
Assume that Caterpillar’s return on investments is 2.50% per annum for the next four years. Next, suppose that Caterpillar and UBS (a financial institution) enter the following four year interest rate swap: Catepillar pays X% per annum fixed to UBS and receives LIBOR from UBS. All payments are made annually. Catepillar’s net return after it enters the swap is (LIBOR + 0.75%) per annum. In this case, Catepillar transforms ___________ into __________ and X equals to ________.a. Floating Rate Investment; Fixed Rate Investment; 1.75%b. Fixed Rate Investment; Floating Rate Investment; 3.25% c. Floating Rate Liability; Fixed Rate Liability; 3.25%d. Fixed Rate Investment; Floating Rate Investment; 3.50%e. Fixed Rate Investment; Floating Rate Investment; 1.75%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS