Question 1: 6 marksCompany A can borrow money at a fixed rate of 9 percent or a variablerate set at prime plus 1 percent. Company B can borrow money at avariable rate of prime plus 2 percent or a fixed rate of 8.25 percent.Company A prefers a fixed rate and company B prefers a variable rate.A swap dealer can bring them together for a commission of 1% on theswap deal and the companies allocate the remaining QSD as 0.25% and0.5% to companies A and B respectively.i) Is there any gain for the concerned parties through the swapdeal?(3 marks)ii) If so, show a swapping arrangement, ensuring that both CompanyA and B are better off and the swap and the swap dealer gets the1% cut.(3 marks)

Part ii) Structuring the Swap to Benefit Both Companies and the Swap Dealer Step 1: Define Each…

Answered: Question 1: 6 marks Company A can…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 11QA

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Company A can borrow money at a fixed rate of 9 percent or a variablerate set at prime plus 1 percent. Company B can borrow money at avariable rate of prime plus 2 percent or a fixed rate of 8.25 percent.Company A prefers a fixed rate and company B prefers a variable rate.A swap dealer can bring them together for a commission of 1% on theswap deal and the companies allocate the remaining QSD as 0.25% and0.5% to companies A and B respectively. i) Is there any gain for the concerned parties through the swapdeal?ii) If so, show a swapping arrangement, ensuring that both CompanyA and B are better off and the swap and the swap dealer gets the1% cut.
Company A can borrow money at a fixed rate of 9 percent or a variablerate set at prime plus 1 percent. Company B can borrow money at avariable rate of prime plus 2 percent or a fixed rate of 8.25 percent.Company A prefers a fixed rate and company B prefers a variable rate.A swap dealer can bring them together for a commission of 1% on theswap deal and the companies allocate the remaining QSD as 0.25% and0.5% to companies A and B respectively.i) Is there any gain for the concerned parties through the swapdeal?(3 marks)ii) If so, show a swapping arrangement, ensuring that both CompanyA and B are better off and the swap and the swap dealer gets the1% cut.
Please do not copy and paste what has already been posted and all working. Company A can borrow money at a fixed rate of 9 percent or a variable rate set at prime plus 1 percent. Company B can borrow money at a variable rate of prime plus 2 percent or a fixed rate of 8.25 percent. Company A prefers a fixed rate and company B prefers a variable rate. A swap dealer can bring them together for a commission of 1% on the swap deal. a) Compute the potential gain for the concerned parties through the swap deal?
ABC can borrow at either a fixed rate of 11% or a floating rate of LIBOR + 1% XYZ can borrow at either a fixed rate of 10% or a floating rate of LIBOR + 3% The swap dealer can help them meet and negotiate for a fee of 2% of the deal Question: Construct a mutually beneficial swapping arrangement if ABC and XYZ decide to share the available QSD equally and show that the dealer is satisfied with the deal as well.
A firm can issue one of the listed products and convert them into the floating rate using IR swaps (LIBOR for 3.7% fixed). What is the lowest floating rate that the firm can get? Fixed rate note: 4% Simple FRN: L+ 0.5% Inverse floater: 7.6% - L Question 6 options: L+ 0.1% L+ 0.2% L+ 0.3% L+ 0.5%
Solution all.part ,,????
Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap? Multiple Choice 8.65% fixed for prime + 1.3% floating 8.5% fixed for prime + 1.75% floating 8,6% fixed for prime + 1.3% floating 8,65% fixed for prime + 1.25% floating 8.6% fixed for prime + 1.2% floating
Please do not copy and paste what has been already posted. Show full working. Company A can borrow money at a fixed rate of 9 percent or a variable rateset at prime plus 1 percent. Company B can borrow money at a variable rateof prime plus 2 percent or a fixed rate of 8.25 percent. Company A prefersa fixed rate and company B prefers a variable rate. A swap dealer can bringthem together for a commission of 1% on the swap deal.b) Show a swapping arrangement, ensuring that both Company A and B arebetter off and the swap dealer gets the 1% cut.
Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap? a) 8.6% fixed for prime + 1.2% floating b) 8.5% fixed for prime + 1.75% floating c) 8.65% fixed for prime + 1.25% floating d) 8.6% fixed for prime + 1.3% floating e) 8.65% fixed for prime + 1.3% floating
Company A and B has been offered the following rates per annum on a £50 million, 10 - year loan. (SEE PICTURE) Design a swap that is most beneficial to Company A, explain using text and diagram
2. Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Company A Company B Fixed Rate 5.0% 6.4% Floating Rate LIBOR+0.1% LIBOR+0.6% Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a swap that will appear equally attractive to both companies. Answer the question by using excel and explain what did you do in all the parts.

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