Far Side Corporation is expected to pay the

Anna35 [415]

Number 4 is the correct answer

8 0

4 years ago

A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per

sergij07 [2.7K]

Answer:

The loss of the financial institution is $413,000

Explanation:

Let's say that after 3 years the financial institution will receive:

0.5 * 10% of $10million

= 0.5 * 0.1 * 10000000

= $500,000

Then, they will pay 0.5 * 9% of $10M

= 0.5 * 0.09 * 10000000

= $450,000

Therefore, their immediate loss would be $500000 - $450000

= $50000.

Let's assume that forward rates are realized to value the rest of the swap.

The forward rates = 8% per annum.

Therefore, the remaining cash flows are assumed that floating payment is

0.5*0.08*10000000 =

$400,000

Received net payment would be:

500,000-400,000= $100,000. The total cost of default is therefore the cost of foregoing the following cash flows:

Year 3=$50,000

Year 3.5=$100,000

Year 4 = $100,000

Year 4.5= $100,000

Year 5 = $100,000

Discounting these cash flows to year 3 at 4% per six months, the cost of default would be $413,000

4 0

3 years ago

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Rou

Inessa05 [86]

a. The present value of $300 per year for 16 years at 6% is $3,031.77.

It is calculated using an online finance calculator as follows:

N (# of periods) = 16 years

I/Y (Interest per year) 6%

PMT (Periodic Payment) = 300

FV (Future Value) = $0

Results:

PV = $3,031.77

Sum of all periodic payments = $4,800.00

Total Interest $1,768.23

b. The present value of $150 per year for 8 years at 3% is $1,052.95.

It is calculated using an online finance calculator as follows:

(# of periods) = 8 years

I/Y (Interest per year) = 3%

PMT (Periodic Payment) = $150

FV (Future Value) = $0

Results:

PV = $1,052.95

Sum of all periodic payments = $1,200.00

Total Interest = $147.05

c. The present value of $700 per year for 8 years at 0% is $5,600.00.

It is calculated using an online finance calculator as follows:

N (# of periods) = 8 years

I/Y (Interest per year) = 0%

PMT (Periodic Payment) = $700

FV (Future Value) = $0

Results

PV = $5,600.00

Sum of all periodic payments = $5,600.00

d. The present value of $300 per year for 16 years at 6% as an annuity due is $3,213.67.

It is calculated using an online finance calculator as follows:

N (# of periods) = 16 years

I/Y (Interest per year) 6%

PMT (Periodic Payment) = 300

FV (Future Value) = $0

Results:

PV = $3,213.67

Sum of all periodic payments = $4,800.00

Total Interest = $1,586.33

e. The present value of $150 per year for 8 years at 3% as an annuity due is $1,084.54.

It is calculated using an online finance calculator as follows:

(# of periods) = 8 years

I/Y (Interest per year) = 3%

PMT (Periodic Payment) = $150

FV (Future Value) = $0

Results:

PV = $1,084.54

Sum of all periodic payments = $1,200.00

Total Interest = $115.46

f. The present value of $700 per year for 8 years at 0% as an annuity due is $5,600.

It is calculated using an online finance calculator as follows:

N (# of periods) = 8 years

I/Y (Interest per year) = 0%

PMT (Periodic Payment) = $700

FV (Future Value) = $0

Results

PV = $5,600.00

Sum of all periodic payments = $5,600.00

<h3>What is the difference between an ordinary annuity and an annuity due?</h3>

An ordinary annuity involves regular payments made <u>at the end</u> of each period, while an annuity due involves payments are made at the <u>beginning</u> of each period. For example, consistent quarterly stock dividends are an ordinary annuity just as monthly rent is an annuity due.

<h3>Data and Calculations:</h3>

a. $300 per year for 16 years at 6%

b. $150 per year for 8 years at 3%

c. $700 per year for 8 years at 0%

d. Present value of $300 per year for 16 years at 6%

e. Present value of $150 per year for 8 years at 3%

f. Present value of $700 per year for 8 years at 0%

Learn more about annuity at brainly.com/question/25792915

6 0

2 years ago

Find both the arithmetic growth rate and the geometric growth rate of the dividends for Custer's Ice Cream Shoppes.

Katen [24]

Answer:

Arithmetic Growth rate is about 19.89%

Geometric Growth rate is about 23.44%

Explanation:

Dividend Arithmetic Growth rate is calculated as follows

Step 1:

Find the growth rate of each year

Step 2:

Take its sum

Step 3:

Make an average by dividing the sum of all growths by Number of years in growth.

Dividend Arithmetic Growth rate is calculated as follows

Step 1:

Find the growth rate of each year

Step 2:

Take sum of all positive growth rates because geometric mean does not include the negative values.

Step 3: Multiply every growth and take the square root of the resultant product of these growths.

A MS Excel File is attached for the working. please find it.

Download xlsx

4 0

3 years ago

1. The production function above expresses output as a function of capital and labor (workers). Derive a function that expresses

DiKsa [7]

Nice to do with the thing and the 2 for

4 0

4 years ago