Company X and Company Y have been offered for the following rates per annum on a RM30 million 5-year loan. Company X Company Y Fixed rate 12.5% 12.5% Floating rate 3-month KLIBOR+2% 3-month KLIBOR + 2.75% Preferred loan Fixed rate Floating rate You work for KL Bank, and thinks that the quoted rate are arbitrageable by means of an interest rate swap. Design a fixed-for-floating interest rate swap. Show the percentage gain to each party, assuming that the mispricing is split equally among three parties.
Company X and Company Y have been offered for the following rates per annum on a RM30 million 5-year loan. Company X Company Y Fixed rate 12.5% 12.5% Floating rate 3-month KLIBOR+2% 3-month KLIBOR + 2.75% Preferred loan Fixed rate Floating rate You work for KL Bank, and thinks that the quoted rate are arbitrageable by means of an interest rate swap. Design a fixed-for-floating interest rate swap. Show the percentage gain to each party, assuming that the mispricing is split equally among three parties.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Company X and Company Y have been offered for the following rates per annum on a RM30 million 5-year loan.
|
|
Company X |
Company Y |
|
Fixed rate |
12.5% |
12.5% |
|
Floating rate |
3-month KLIBOR+2% |
3-month KLIBOR + 2.75% |
|
Preferred loan |
Fixed rate |
Floating rate |
You work for KL Bank, and thinks that the quoted rate are arbitrageable by means of an interest rate swap. Design a fixed-for-floating interest rate swap. Show the percentage gain to each party, assuming that the mispricing is split equally among three parties.
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