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Xelga [282]
3 years ago
5

Luke enters into a three-year interest rate swap to receive a fixed rate and pay a variable rate based on future 1-year LIBOR ra

tes. The settlement occurs at the end of every year. The notional amount is 1,000 for year 1, 800 for year 2, and 600 for year 3. tt stst 1 4% 2 5% 3 6% 4 7% 5 8% Determine the net swap payment made at the end of the first year.
Business
1 answer:
Sladkaya [172]3 years ago
5 0

Answer:

The net swap payment made is $49.

Explanation:

In order to find the solution the values are used which are as follows:

The Value of interest in each year is calcuated as follows

Interest=Interest\ Rate\%\times Amount

The values of interest rate and amount for 3 years are as follows:

  • Interest rate for year 1 is 4% for an amount of 1000
  • Interest rate for year 2 is 5% for the amount of 1800
  • Interest rate for the year 3 is 6% for the amount of 800.

These values are calculated as follows:

Interest_1=4\%\times 1000\\Interest_1=40

Similarly

Interest_2=5\%\times 1800\\Interest_2=90

Also

Interest_3=6\%\times 800\\Interest_3=48

So the total interest is

Interest_T=Interest_1+Interest_2+Interest_3\\Interest_T=40+90+48\\Interest_T=178

The total amount is given as

Amount_T=Amount_1+Amount_2+Amount_3\\Amount_T=1000+1800+800\\Amount_T=3600

Fixed rate is given as

\dfrac{Interest_T}{Amount_T}\\=\dfrac{178}{3600}\\\\=0.049\ or\ 4.9\%

Now for the swap payment made at the end of first year is

Amount_{1st swap}=Fixed Rate\times Amount_1\\Amount_{1st swap}=4.9\%\times 1000\\Amount_{1st swap}=$49

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The Law of Demand is a rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship b
guajiro [1.7K]

Answer:

True

Explanation:

The variables price and quantity are inverse correlated then a change in 1 has the exact  opposite effect in the other.

6 0
3 years ago
Based on the experiences of Thailand, Kenya and China in promoting family planning, what do you think the key is to reducing pop
ratelena [41]
Family planning is the major point so as to reduce birth rate in the country immigration and emigration
3 0
2 years ago
Rainbow Co. began operations in 2019 and reported $600,000 in income before income taxes for the year. Rainbow’s 2019 tax deprec
cricket20 [7]

Answer:

30.000

Explanation:

Income before taxes  $300,000

Timing difference between books and Tax (A) $100,000

Permanent difference cannot be considered for calculation of Differed tax liability or Deferred tax asset $40,000 (B)  is zero

Total Timing deference (C=A+B)  $100,000

Tax rate enacted for future (D)  30%

<h2>Differed tax liability (C*D)  $30,000 </h2>

<h2></h2>

4 0
3 years ago
Freytag Corporation's variable overhead is applied on the basis of direct labor-hours. The company has established the following
Serjik [45]

Answer:

a. -$783 Unfavorable

b. 550 Favorable

Explanation:

a. The computation of Variable Overhead Rate Variance is shown below:-

Variable Overhead Rate Variance = Actual hours × (Standard Variable Overhead rate per hour - Actual Variable Overhead rate per hour)

= 8,700 × ($4.10 - ($36,540 ÷ 8,700)

=  8,700 × ($4.10 - $4.19)

= 8,700 × -$0.09

= -$783 Unfavorable

b. The computation of Variable Overhead Efficiency Variance is shown below:-

Variable Overhead Efficiency Variance = Standard Variable Overhead Rate per Hour ×  (Standard Hours for Actual Production - Actual Hours)

= 5.5 × ((5.5 × 1,600) - 8,700)

= 5.5 × (8,800 - 8,700)

= 5.5 × 100

= 550 Favorable

5 0
3 years ago
A dressmaker can sew 400 garments with 100 bolts of fabric and 1,500 hours of labor. Another dressmaker can sew 400 garments wit
faust18 [17]

Answer:

No, because the second method has lower total costs of production.

Explanation:

In a bid to make profits businesses must always compare different processes and choose the cheapest one.

This will eventually reflect in the profitability of the business.

In this instance let's get the cost of each process.

Fabric costs $110 a bolt and labor costs $20 an hour.

The first dress maker can sew 400 garments with 100 bolts of fabric and 1,500 hours of labour

Total cost = (100 bolts * 110) + (1500 * 20)

Total cost = $41,000

For the second dress maker he can sew 400 garments with 150 bolts of fabric and 1,000 hours of identical labour

Total cost = (150 *110) + (1000 * 20)

Total cost = $36,500

As can be seen the second dressmaker has a lower cost of production so he is more efficient than the first dress maker

7 0
3 years ago
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