You, as the head of the derivatives division in an Investment bank, are trying to price a 6-month quarterly Interest rate swapcontract with the notional amount of 100 million. Today (Jul 1, 2007) you observe the annualized 3-month LIBOR of 5.0% that isused for this quarter and the Eurodollar future price of $82 for the next quarter found from CMEgroup.com. You use the actualnumber of days per 360 basis for each period and found 92 days for both periods. The terms of the swap contracts specify thequarterly payments for floating cash flow. Determine the present value (P) of floating payments at the inception of the swap.9 million <= PVO 7.5 million <= PV < 9 millionO 6 million <- PV < 7.5 million4.5 million <- PV < 6 millionO PV < 4.5 million

The present value of floating payments at the inception of the swap is 6 million ≤PV<7.5 million…

Answered: You, as the head of the derivatives…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Your grandfather deposits $50,000 into your savings account that pays 6% interest compounded quarterly. Equal annual withdrawals are to be made from the account beginning 1 year from now and continuing forever. The maximum amount of equal annual withdrawals are approximate:
Suppose you have an opportunity to invest in a fund that pays 11% interest compounded annually. Today, you invest $5,000 into this fund. Three years later (EOY 3), you borrow $2,500 from a local bank at 6% annual interest and invest it in the fund. Two years later (EOY 5), you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal (EOY 8) you start taking $1,000 per year out of the fund. After five withdrawals of $1,000, you have withdrawn your original $5,000. The amount remaining in the fund is earned interest. How much remains? Click the icon to view the interest and annuity table for discrete compounding when i = 6% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 11% per year. www
In the normal interest equation [(1 + i)^n] do we need to find the effective interest rate [1 + (r/m)]^m then directly plug in the found effective interest rate or not into the normal interest equation [(1 + i)^n] (when dealing with a non-annual compounding period). EXPLAIN WHY or WHY NOT (in detail, in an easy to understand format).
A payment stream consists of three payments: $1,900 due today, $2,400 due 80 days from today, and $2,900 due 180 days from today. What single payment, 70 days from today, is economically equivalent to the payment stream if money can be invested at a rate of 4.4%? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.) Single payment $
The nominal interest rate is 14% compounded semiannually. What amount will need to be deposited every six months to be able to have enough money to pay three annuity payments of $20,000 for three years beginning at the end of year seven? The deposits begin now and continue every six months until six deposits have been made. The amount to be deposited every six months is $ (Round to the nearest dollar.)
Three months ago, Jim purchased $11,000 of U.S. Treasury bonds. These bonds have a 30-year maturity period, and they pay dividends every three months at an APR of 17%. However, today's interest rates for similar securities have risen to a (17+1)%APR (compounded quarterly). In view of the interest-rate increase to (17+1)%, what is the current value of Jim's bonds today?
Globo-Chem Co. is expected to generate a free cash flow (FCF) of $1,065.00 million this year (FCF, = $1,065.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF, and FCF,). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF.). Assume the firm has no nonoperating assets. If Globo-Chem Co.s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Globo-Chem Co.? (Note: Round all intermediate calculations to two decimal places.) O $21,183,44 million O $3,183.42 million $17,652.87 million $23,939.64 million Globo-Chem Co.s debt has a market value of $13,240 million, and Globo-Chem Co. has no preferred stock, If Globo-Chem Co. has 600 million shares of common stock outstanding, what is Globo-Chem Co.s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.) $8.09 O $6.35 O…
If $4,000 is borrowed today and $8,955 is paid back in 10 years, what interest rate compounded annually has been earned? % Round entry to one decimal place. Tolerance is ±0.2.
don't provide handwritten solution
John is a very cost-conscious investor. His rule of thumb is that it costs $200 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $200 each year over the life of the car. John is now considering the purchase of a four-year old car with 40,000 miles on it for $7,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for eight years? John's interest rate is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.)
4) Periodic maintenance and rebuild costs is an example about cash inflow estimates. Select one: True False 5) When we have a situation that the payment does not start at the end of period 1, then the series is called shifted series Select one: True False 6) In case of an effective interest rate for continuous compounding, the compounding frequency value is approximate to infinity. Select one: True False
Find PV: You can deposit money into a money market account that earns 3.5% interest per year. How much do you need to deposit into the account today in order to have the account balance be: $2,000 in one year? $4,000 in one year? $4,000 in two years?

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