Ford Motor Company just hired a new CFO who finds that they have a five year floating rate borrowing outstanding at LIBOR +10 basis points. The CFO thinks rates will go higher, calls Bank of America, and receives a five year swap quote of 1.75% / 1.85% against LIBOR flat. If the CFO executes on this idea, The CFO will receive fixed for an all-in, net funding cost of 1.85% The CFO will pay fixed for an all-in, net funding cost of 1.95% The CFO will pay fixed for an all-in, net funding cost of 1.75% The CFO will receive fixed for an all-in, net funding cost of 1.75% The CFO will pay fixed for an all-in, net funding cost of 1.85%
Ford Motor Company just hired a new CFO who finds that they have a five year floating rate borrowing outstanding at LIBOR +10 basis points. The CFO thinks rates will go higher, calls Bank of America, and receives a five year swap quote of 1.75% / 1.85% against LIBOR flat. If the CFO executes on this idea, The CFO will receive fixed for an all-in, net funding cost of 1.85% The CFO will pay fixed for an all-in, net funding cost of 1.95% The CFO will pay fixed for an all-in, net funding cost of 1.75% The CFO will receive fixed for an all-in, net funding cost of 1.75% The CFO will pay fixed for an all-in, net funding cost of 1.85%
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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Ford Motor Company just hired a new CFO who finds that they have a five year floating rate borrowing outstanding at LIBOR +10 basis points. The CFO thinks rates will go higher, calls Bank of America, and receives a five year swap quote of 1.75% / 1.85% against LIBOR flat. If the CFO executes on this idea,
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The CFO will receive fixed for an all-in, net funding cost of 1.85% |
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The CFO will pay fixed for an all-in, net funding cost of 1.95% |
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The CFO will pay fixed for an all-in, net funding cost of 1.75% |
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The CFO will receive fixed for an all-in, net funding cost of 1.75% |
||
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The CFO will pay fixed for an all-in, net funding cost of 1.85% |
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