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Gnesinka [82]
4 years ago
12

XYZ Corp owns a 3-year $10 million par floating rate bond. The coupons on the bond are 12-month LIBOR. XYZ would like to hedge a

gainst interest rates falling by entering into an interest rate swap with a $10 million notional that receives a fixed rate and pays a floating rate (12-month LIBOR). You are given the following prices for zero coupon bonds. Years to Maturity Zero-coupon Bond Price 1 0.99 2 0.97 3 0.93 Calculate the fixed rate XYZ Corp would receive on the swap.
Business
1 answer:
malfutka [58]4 years ago
3 0

Answer:

 2.45%

Explanation:

The computation of the fixed rate is shown below:

Years to maturity   Zero coupon  bond price  YTM      Forward rate

1                                 0.99                     1.01%  

2                                      0.97                             1.53%       2.06%

3                                      0.93                            2.45%     4.30%

The fixed rate should be equivalent to the YTM of the 3 year bond i.e. 2.45% the same is to be considered

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alexandr1967 [171]
An animated reconstruction of the plane crash was used in a trial as DEMONSTRATIVE EVIDENCE, illustrating the effects of extremely dangerous cross winds on the plane.
Demonstrative evidence refers to physical objects, such as graphs, pictures, models, etc, which are used to clarify the facts for how an accident occurred. It is useful in establishing the facts of an occurrence.
5 0
3 years ago
As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories genera
yanalaym [24]

Answer: True

Explanation:

Current assets are the assets that a company had and which are expected to be either used or sold over the next year. Examples of current assets are cash, cash equivalents, stock inventory, accounts receivable, marketable securities, and other liquid assets.

It should be noted that when the sales of a from continue to grow, the current assets of such company also increases. An example is when there is an increase in the sales increase, this.will also have an impact on the firm's inventories as there will be an increase.

6 0
4 years ago
Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the com
spin [16.1K]

Answer: 7.48%

Explanation:

Weighted Average Cost of capital is simply the weighted average of the costs of equity and debt.

Cost of Equity

= \frac{Next dividend}{Stock Price ( 1 - flotation Costs)} + growth rate

= \frac{0.65}{19(1 -0.1)} + 0.06

= 9.80%

Cost of debt

= Interest ( 1 - Tax)

= 0.075 (1 - 0.40)

= 4.65%

WACC = 9.80% * 0.55 + 4.65% * 0.45

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6 0
3 years ago
Suppose that you take $150 in currency out of your pocket and deposit it in your checking account. If the required reserve ratio
PilotLPTM [1.2K]

Answer:

The largest amount by which the money supply can increase is $1,875

Explanation:

According to the given data, we have the following:

Checking/Demand Deposit = $150 (which is assumed to be the part of new money supply)

Required reserve ratio = 8% = 0.08

Therefore, first we need to calculate the money supplier as follows:

Money multiplier 1/rr

Money multiplier = 1/0.08

Money multiplier = 12.5

Hence for $150 deposited the money supply will increase by $(150×12.5) =$1,875

The largest amount by which the money supply can increase is $1,875

7 0
4 years ago
You will receive $15,000 in two years when you graduate. You plan to invest this at an annual interest rate of 6.5%. How much mo
Sunny_sXe [5.5K]

Answer:

FV= $21,887.13

Explanation:

Giving the following information:

Initial investment= $15,000

Number of periods= 6 years

Interest rate= 6.5% compounded annually

T<u>o calculate the future value of the investment, we need to use the following formula:</u>

FV= PV*(1+i)^n

FV= 15,000*(1.065^6)

FV= $21,887.13

8 0
4 years ago
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