Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Management Expert

Given information:

Offered a $20 million commercial loan priced using a 3month LIBOR index+100bp. After some preliminary research, using a money center bank’s swap trading desk and its traders’ connections, a possible deal has started taking shape.  Another company would be willing to pay our company a floating rate payment priced at 3-month Libor+25bp, while our company would have an obligation to pay a fixed rate of 5.55% annualized, with quarterly settlements. I’m not overly concerned with the other party’s reasons for requiring these payments, so we don’t have to find out the other party’s final cost. But we do need to remember that fixed-rate swap payments are made on a semiannual basis, based on 30/90/180/360 Accrual Year Fraction, while floating-rate side payments are being made on a quarterly basis, based on Actual/360 Accrual Year Fraction.
find out what would be the ultimate cost of the loan to our company. For the purpose of this assignment you may ignore the carrying costs and the brokerage fees of the swap arrangement.

1) Determine the basis for the payment to the lender: 3-month Libor+100bp.
2) Determine the basis for the payment to the company-counterparty.
3) Determine the basis for the payment to be received from the company-counterparty.
4) Determine the basis of the ultimate cost of the payment to the lender to our company.
5) find out both of the following:
a) The quarterly payment, using appropriate accrual convention if a floating-rate basis for the ultimate cost in Step 4
b) A semiannual payment using appropriate accrual convention if a fixed-rate basis for the ultimate cost in Step 4

Deliverables:

1) The basis of the ultimate cost of the payment to the lender to our company.  Please include Steps 1-4, as listed above, with details of your calculations.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M9339

Have any Question? 


Related Questions in Financial Management

Sustainable competitive advantage is influenced by check

Sustainable competitive advantage is influenced by: (Check all that apply) a lower price for the customer based on the value created for them (due to your operations or other cost control strategies) a rareness factor, m ...

Mckenna sports authority is getting ready to produce a new

McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $837,500, and $1,200,000 over the next three year ...

Develop a plan for managing your debt how many sources of

Develop a plan for managing your debt. How many sources of debt do you current have, and what are the balances owed on each? What specific behavioral steps do you personally need to take to match your debt aspirations wi ...

As a general contractor conway construction corporation ccc

As a general contractor, Conway Construction Corporation (CCC) entered into a written contract with Setcher Roofing Company (SRC) for all roofing, decking, and sheetmetal on the Bentonville High School project for a cont ...

Most investments involve a certain level of risk risk can

Most investments involve a certain level of risk. Risk can affect the return on an asset or a portfolio. Measuring risk will help determine the expected return on an investment. Discuss the concept of risk and how it is ...

Thames incs most recent dividend was 220 per share ie d0220

Thames Inc.'s most recent dividend was @2.20 per share (i.e., D0=$2.20). The dividend and stock price ae expected to grow at a rate of 5% per year. The stock price is currently $44? What is the required return on equity ...

1 what are the basic corporate ownership public vs

1) What are the basic corporate ownership (Public vs enterprise, publically trades or not, the role of other stake holders, family union, government and financial institutions in Japan. 2) Which theory / model about goal ...

In april 2009 as part of the stimulus package intended to

In April 2009, as part of the stimulus package intended to fight the recession of 2007-2009, Congress authorized "Build America Bonds," which states and cities could issue to build roads, bridges, and schools. Unlike wit ...

1 you believe that a particular stock has an expected

1. You believe that a particular stock has an expected return of 15%. The stock's beta is 1.2, the risk-free rate is 3%, and the expected market risk premium is 6%. Based on this, is your view that the stock is overvalue ...

Martinez inc acquired a patent on january 1 2016 for 41600

Martinez, Inc. acquired a patent on January 1, 2016 for $41,600 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2017, before any adjustments were recorded for the ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro