Pepper Corp. wants to finance an investment worth an amount equivalent to USD 185 million. It can borrow fixed-rate JPY at a rate of 4.56%, or it can borrow floating-rate USD at LIBOR + 0.25%. Truffles Corp. also faces a USD 185 million investment, and it can borrow fixed-rate JPY at a rate of 4.8%, or it can borrow floating-rate USD at LIBOR + 0.88%. Pepper Corp. would like to borrow fixed-rate JPY and Truffles Corp. would like to borrow floating-rate USD. What are the possible cost savings to Pepper Corp. in INR terms from a swap agreement if Westpac charges a fee of 8 basis points to arrange the swap? Assume all remaining cost savings accrue to Pepper Corp. Assume the current exchange rate is JPY75/USD. a. 43.0125 million b. 0.0096 million c. 54.1125 million d. 0.0076 million e. There are no cost savings to Pepper Corp. from a swap.
Pepper Corp. wants to finance an investment worth an amount equivalent to USD 185 million. It can borrow fixed-rate JPY at a rate of 4.56%, or it can borrow floating-rate USD at LIBOR + 0.25%. Truffles Corp. also faces a USD 185 million investment, and it can borrow fixed-rate JPY at a rate of 4.8%, or it can borrow floating-rate USD at LIBOR + 0.88%. Pepper Corp. would like to borrow fixed-rate JPY and Truffles Corp. would like to borrow floating-rate USD. What are the possible cost savings to Pepper Corp. in INR terms from a swap agreement if Westpac charges a fee of 8 basis points to arrange the swap? Assume all remaining cost savings accrue to Pepper Corp. Assume the current exchange rate is JPY75/USD. a. 43.0125 million b. 0.0096 million c. 54.1125 million d. 0.0076 million e. There are no cost savings to Pepper Corp. from a swap.
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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![Pepper Corp. wants to finance an investment worth an amount equivalent to USD 185 million. It can borrow fixed-rate JPY
at a rate of 4.56%, or it can borrow floating-rate USD at LIBOR + 0.25%.
Truffles Corp. also faces a USD 185 million investment, and it can borrow fixed-rate JPY at a rate of 4.8%, or it can borrow
floating-rate USD at LIBOR + 0.88%.
Pepper Corp. would like to borrow fixed-rate JPY and Truffles Corp. would like to borrow floating-rate USD.
What are the possible cost savings to Pepper Corp. in INR terms from a swap agreement if Westpac charges a fee of 8
basis points to arrange the swap? Assume all remaining cost savings accrue to Pepper Corp.
Assume the current exchange rate is JPY75/USD.
a. 43.0125 million
b. 0.0096 million
c. 54.1125 million
d. 0.0076 million
e. There are no cost savings to Pepper Corp. from a swap.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb64fa3cf-95a0-4e6f-83fe-4a41b9431523%2F8a1dab7d-631b-4d88-988e-ec92271e8cae%2Fwu4y1pl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Pepper Corp. wants to finance an investment worth an amount equivalent to USD 185 million. It can borrow fixed-rate JPY
at a rate of 4.56%, or it can borrow floating-rate USD at LIBOR + 0.25%.
Truffles Corp. also faces a USD 185 million investment, and it can borrow fixed-rate JPY at a rate of 4.8%, or it can borrow
floating-rate USD at LIBOR + 0.88%.
Pepper Corp. would like to borrow fixed-rate JPY and Truffles Corp. would like to borrow floating-rate USD.
What are the possible cost savings to Pepper Corp. in INR terms from a swap agreement if Westpac charges a fee of 8
basis points to arrange the swap? Assume all remaining cost savings accrue to Pepper Corp.
Assume the current exchange rate is JPY75/USD.
a. 43.0125 million
b. 0.0096 million
c. 54.1125 million
d. 0.0076 million
e. There are no cost savings to Pepper Corp. from a swap.
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