A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed rate of 10.30 percent annually on a notional amount of €15,000,000 and receive six- month CME Term SOFR +0.5 percent. As of the second reset date, determine the price of the swap from the corporation's viewpoint assuming that the fixed rate side of the swap has increased to 10.80 percent. Answer is complete but not entirely correct. Swap price 11
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- A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed rate of 9.90 percent annually on a notional amount of €15,000,000 and receive six-month CME Term SOFR +0.5 percent. As of the second reset date, determine the price of the swap from the corporation's viewpoint assuming that the fixed rate side of the swap has increased to 10.40 percent. Swap priceA U.S. company has entered into an interest rate swap with a dealer in which the notional principal is $50 million.The company will pay a floating rate of LIBOR and receive a fixed rate of 5.75 percent. Interest is paid semiannually,and the current LIBOR is 5.15 percent. Calculate the first payment. Assume that floating-rate payments will be madeon the basis of 180/360 and fixed-rate payments will be made on the basis of 180/365.a. $130,308.20, the floating-rate payer will receive b. $130,308.20, the fixed-rate payer will receivec. $50 million, the fixed-rate payer will pay d. $50 million, the floating-rate payer will payIncredible Inc., a manufacturer of children’s toys, enters into a two-year plain vanilla interest rate swap, in which the corporation will receive a fixed rate and pay a floating rate of LIBOR. The notional amount on this swap is $75 million. Swap payments will be netted every 180 days, and the LIBOR requires the assumption of a 360-day year. The term structure of LIBOR on the swap initiation date is as follows: Days Rate (%) 180 3.50 360 3.55 540 3.60 720 3.70 a. What is the fixed rate determined on the swap initiation date? b. Calculate the swap value on the initiation date.
- Netflix company has entered into a plain vanilla interest rate swap on $2,500,000 notional principal. The company pays fixed rate of 7.0% on payments that occur at 60-day intervals. Six payments remain with the next one due in exactly 60 days. On the other side of the swap, the company receives payments based on the LIBOR rate. Describe the transaction that occurs between the company and the dealer at the end of the first period if the appropriate LIBOR rate is 8.5%.On January 1, 2024, Avalanche Corporation borrowed $122,000 from First Bank by issuing a two-year, 8% fixed-rate note with annual interest payments. The principal of the note is due on December 31, 2025. Avalanche wanted to hedge against declines in general interest rates, so it also entered into a two-year SOFR-based interest rate swap agreement on January 1, 2024, and designates it as a fair value hedge. Because the swap is entered at market rates, the fair value of the swap is zero at inception. The agreement called for the company to receive fixed interest at the current SOFR swap rate of 5% and pay floating interest tied to SOFR. This arrangement results in an effective variable rate on the note of SOFR + 3%. The contract specifies that the floating rate resets each year on June 30 and December 31 for the net settlement that is due the following period. In other words, the net cash settlement is calculated using beginning- of-period rates. The SOFR rates on the swap reset dates…Styles c)A swap agreement calls for Grand Industries to pay interest annually based on a rate of 1% over the one year T bill rate, currently 6%. In return, Grand receives interest at a rate of 6% on a fixed rate basis. The notional principal for the swap is $ 500000| What is Grand's net interest for the year after the agreement?
- . On December 31, 2020, SSNIT and SIC (non-life) entered into a six year swap arrangement with first payment to be exchanged on December 31st, 2022 and each December 31st thereafter under the following terms: SIC will pay SSNIT an amount equals to 5% per annum on a notional principal of US$50 million. (FIXED Amount) SSNIT will pay SIC an amount equals to one-year LIBOR +1.25% per annum on a notional amount of US$50 million. (Flexible Amount). On 31stDecember 2022, one-year LIBOR is projected to be 2.75%. What will be the payment flows for the first year, December 31st?Amazon corporation and Microsoft corporation agree to enter an interest swap agreement with a nominal value of $1,000,000. The two companies enter into two-year interest rate swap contract with the specified nominal value of $1,000,000. Amazon corporation offers Microsoft corporation a fixed rate of 5% in exchange for receiving a floating rate of the LIBOR rate plus 1%. The current LIBOR rate at the beginning of the interest rate swap agreement is 4%. Critically evaluate interest rate swap agreements focusing on their significance and advantages in financial management.A (the Payer) enters into a fixed for floating swap arrangement with B (the Receiver). USD 360-day LIBOR at the date the swap is created: 3.72% USD 360-day LIBOR after 1 year: 3.81% The terms of the agreement are as follows: Fixed rate 4.22% Tenor, years 2.0 Notional principal 4,000,000.0 Frequency Annual Floating rate USD 360 - day LIBOR What is the net cash flow for B ( the Receiver) in year 1? Select one: 20,000.0 16,400.0 (16,400.0) (20,000.0)
- mazon corporation and Microsoft corporation agree to enter an interest swap agreement with a nominal value of $1,000,000. The two companies enter into two-year interest rate swap contract with the specified nominal value of $1,000,000. Amazon corporation offers Microsoft corporation a fixed rate of 5% in exchange for receiving a floating rate of the LIBOR rate plus 1%. The current LIBOR rate at the beginning of the interest rate swap agreement is 4%. a) If LIBOR rate increases to 5.25% by the end of the first year what are the payment due between both companies? Assume interest payment will be made annually and the floating rate for Microsoft corporation will be calculated using the prevailing LIBOR rate at the time that interest payments are due. b) Critically evaluate interest rate swap agreements focusing on their significance and advantages in financial management.Company B (CB) entered into an interest rate swap contract with Company C (CC) effective January 1, 2020. Specifically, CB agrees to pay CC’s interest and CC will pay CB’s interest. The contract lasts for three years. CB is attempting to hedge their cash flow risk exposure on their floating rate debt on a loan of $ 3,000,000 which is due in full in three years. CC is attempting to hedge their fair value risk exposure on their fixed rate debt of $ 3,000,000 which is also due in three years in full. The notional principal in the swap contract is $ 3,000,000. The fixed rate and variable rate on January 1, 2020 were both 5%. During 2020 the variable rate increased to 6 %. Required. (a) Prepare the journal entries for 2020 for CB and CC using IFRS and ASPE if optional hedge accounting is used. Explain your answer. (b) Prepare the journal entries for 2020 for CB and CC using IFRS and ASPE if optional hedge accounting is not used. Explain your answer.Tuba Co. enters into a “receive variable, pay fixed” interest swap on January 1, 20x1 for a notional amount of ₱1,000,000. Under the terms of the contract, if the current rate increases above 12% (i.e., the set rate), Tuba Co. shall receive the excess interest. If the current rate falls below 12%, Tuba Co. shall pay the deficiency. Swap payment shall be made on December 31, 20x2. The current rates are as follows: Jan. 1, 20x1……………………………12% Jan. 1, 20x2……………………………15% How much is the net cash settlement on December 31, 20x2? 30,0000 payment 30,000 receipt 26,087 payment 26,087 receipt