Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Suppose a Swiss firm, SandyCom Ltd, wants  to invest in the U.S. The Swiss firm needs US dollars with a term to maturity of 5 years against a fixed interest rate. However, the Swiss firm is not very well known in the US market, though it is relatively well known in the SFr market. The difference in name recognition is reflected in the interest rate cost of SFr borrowing (9%) and the interest rate costs $ borrowing (11%).
 
A US firm, Kseven Int., needs SFr financing with a term to maturity of five years against a fixed interest rate. The US firm is not well known in the SFr market, but well known in the $Market. Again the difference in name recognition is reflected in the interest rate cost of SFr borrowing of 9.8% and the interest rate costs of $ borrowing 10.5%.

problem 1: Show that, without an intermediary, there is a potential gain of 1.3% that exists from a swap transaction.
 
problem 2: You are needed to devise a currency swap which would permit each firm to benefit from borrowing cost savings. It was agreed that the Swiss firm would receive 0.5% and the US firm 0.8% of the total 1.3% potential gain. Describe carefully the steps and make clear any suppositions.

problem 3: Supposing, as an intermediary, you will charge a fee for arranging the swap. Show the fee charged would influence the potential gain. The fee will be shared by each firm equally. You can suppose any suitable fee.

problem 4: Are there any risks comprised in such a transaction? 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M95894

Have any Question? 


Related Questions in Basic Finance

Suppose your firm is seeking a four year amortizing 290000

Suppose your firm is seeking a four year, amortizing $290,000 loan with annual payments and your bank is offering you the choice between a $299,500 loan with a $9,500 compensating balance and a $290,000 loan without a co ...

Assessment task 1- referencing style apa with in text

Assessment Task 1: - Referencing style: APA with in text referencing - Answer each questions with references and (formulas if required) - showing the right formulae to be used, the steps shown in arriving at the answers, ...

To analyze various retirement-planning options check out

To analyze various retirement-planning options, check out the financial calculator at Bloomberg (http://www.bloomberg.com). Determine the effect of waiting versus immediate planning for retirement. What is the effect of ...

A firm has a capital structure that uses 45 percent equity

A firm has a capital structure that uses 45 percent equity, 20 percent preferred shares, and 35 percent debt. The preferred shares have a current yield of 5.5 percent. The debt has a coupon rate of 10 percent and a curre ...

A researcher has a sample of 30 rats that are all cloned

A researcher has a sample of 30 rats that are all cloned from the same source. The 30 rats are genetically identical and have been raised in exactly the same environment since birth. The researcher conducts an experiment ...

Cost estimation and budgetingan important aspect of cost

Cost Estimation and Budgeting An important aspect of cost budgeting is personnel. A current professional issue in the engineering field is companies using contract engineers like employees but refusing to actually make t ...

For each of the following operational definitions decide

For each of the following operational definitions, decide whether you consider it to be a valid measure. Explain why or why not. Decide whether you consider it to be a reliable measure. Explain why or why not. a. A resea ...

1 what are transition economies what are some of the

1. What are transition economies? What are some of the important changes occurring in transition economies? 2. Discuss some of the major legal systems that exist around the world. What are some of the most important diff ...

Nicollette nbspjoined towson university basketball team

Nicollette  joined Towson University basketball team since summer 2015. On average, she is able to score 30% of the field goals. Assume she tries 15 field goals in a game. (a) Let X be the number of field goals that Mimi ...

1 how influential are corporate and personal taxes on

1. How influential are corporate and personal taxes on capital structure? Historically, have changes in American tax rates greatly affected debt ratios? 2. How do stock prices generally react to announcements of firms' c ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen