Roo-Fus Inc is considering financing its international expansions by borrowing in the international debt markets. The current annualized 30-day LIBOR rate is 4.4%. Roo-Fus Inc expects that the next period's 30-day LIBOR is 9.6%. Roo-Fus Inc's credit rating implies that it will face a 1.4% premium over LIBOR. What are Roo-Fus Inc's (annualized) borrowing costs? a. This period: 5.8%. Next period: 11.0% b. This period: 5.8%. Next period: 5.8% c. This period: 11.0%. Next period: 11.0% d. This period: 4.4%. Next period: 9.6% e. This period: 4.4%. Next period: 4.4%

Roo-Fus Inc is considering financing its international expansions by borrowing in the international debt markets. The current annualized 30-day LIBOR rate is 4.4%. Roo-Fus Inc expects that the next period's 30-day LIBOR is 9.6%. Roo-Fus Inc's credit rating implies that it will face a 1.4% premium over LIBOR. What are Roo-Fus Inc's (annualized) borrowing costs? a. This period: 5.8%. Next period: 11.0% b. This period: 5.8%. Next period: 5.8% c. This period: 11.0%. Next period: 11.0% d. This period: 4.4%. Next period: 9.6% e. This period: 4.4%. Next period: 4.4%

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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In September 2020, swap dealers were quoting a rate for five-year euro interest-rate swaps of 4.5% against Euribor (the short-term) interest rate for euro loans). Euribor at the time was 4.1%. Suppose that A arranges with a dealer to swap a €10 million five-year fixed- rate loan for an equivalent floating-rate loan in euros, answer the following: (Leave no cells blank - be certain to enter "0" wherever required.) a. Assume the swap is fairly priced. What is the value of this swap at the time that it is entered into? Swap value b. Suppose that immediately after A has entered into the swap, the long-term interest rate rises by 1%. Who gains and who loses? Dealer gains; A loses O A gains; Dealer loses c. What is now the value of the swap to A for each €1,000 of par value? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Swap value
Janutis Co. has just issued fixed rate debt at 10 percent. Yet it prefers to convert its financing to incur a floating rate on its debt. It engages in an interest rate swap in which it swaps variable rate payments of LIBOR plus 1 percent inexchange for payments of 10 percent. The interest rates are applied to an amount that represents the principal from its recent debt issue in order to determine the interest payments due at the end of each year for the next three years. Janutis Co. expects that the LIBOR will be 9 percent at the end of the first year, 8.5 percent at the end of the second year, and 7 percent at the endof the third year. Determine the financing rate that Janutis Co. expects to pay on its debt after considering the effect of the interest rate swap.
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Expected inflation in Argentina for next year is 64%. Expected inflation in Europe, for the same period, is 7.0%. Spot rate today is EUR/ARS=158.70. Using PPP, can you estimate the future spot rate in a year from now? (additional information: 1g of gold today=EUR54.94)
A Canadian bank that issues AUD 250M 5-year bonds to fund AUD 200M loans with 6-year maturity is exposed to the following risks : A depreciation of the Australian dollar against the Canadian plus credit plus liquidity risk plus reinvestment risk, i.e. decreasing interest rates. A depreciation of the Australian dollar against the Canadian dollar, plus credit risk plus liquidity risk plus refinancing risk, i.e. increasing interest rates. An appreciation of the Australian dollar against the Canadian dollar, plus credit risk plus refinancing risk, i.e. increasing interest rates. An appreciation of the Australian dollar against the Canadian dollar, plus credit risk plus reinvestment risk, i.e. decreasing interest rates.
Finance Suppose the year 1, year 2 and year 3 forecasts for the rate of inflation in Denmark are 3%, 4% and 5% respectively. Suppose also that the year 1, year 2 and year 3 forecasts for the rate of inflation in France are 11%, 9% and 8% respectively. If the expected spot rate between the Danish Krone (DKK) and the EUR is EUR0.1344/DKK at the end of year 3, what is the current spot rate?

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