Justbrowsing Corp. will need to take out a 120-day, $ 200,000 loan 60 days from now. To protect against interest rate an interest rate (call/put) option with the premium payed on day t- The option has X=-8.26% and expires in 60 days. The corporation will make a decision on day t= (increases/decreases), the corporation should buy about whether or not to exercise the option. On this day the applicable (spot) interest rate is 9.15%. The corporation (rounded to two decimals) on day t= (should/should not) exercise the option. Payoff will be $

Justbrowsing Corp. will need to take out a 120-day, $ 200,000 loan 60 days from now. To protect against interest rate an interest rate (call/put) option with the premium payed on day t- The option has X=-8.26% and expires in 60 days. The corporation will make a decision on day t= (increases/decreases), the corporation should buy about whether or not to exercise the option. On this day the applicable (spot) interest rate is 9.15%. The corporation (rounded to two decimals) on day t= (should/should not) exercise the option. Payoff will be $

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 2P: Lease versus Buy Consider the data in Problem 19-1. Assume that RCs tax rate is 40% and that the...

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Q1 A company plans to borrow RM3,000,000 for a year. The stated interest rate is 10 percent. Compute the effective interest rate under each of these assumptions. Each part stands alone. a) The interest is discounted. b) There is an 18 percent compensating balance requirement. c) It is a 12 – month instalment loan. d) Assume the interest is only RM75,000 and the loan is for 120 days.
i will 10 upvotes urgent Suppose your firm is seeking an eight-year, amortizing $750,000 loan with annual payments and your bank is offering you the choice between a $795,000 loan with a $45,000 compensating balance and a $750,000 loan without a compensating balance. The interest rate on the $750,000 loan is 8.5 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it?(Do not round intermediate calculations and round your final answer to 2 decimal places.) Interest rate%
QUESTION 14 Dylan's Drivers is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. Dylan's Drivers can lock in the future interest rate payments by using 00 a forward rate agreement. an interest rate future. an interest rate swap. Any of the above
Alpha and Beta Companies can borrow for a five year term at the following rates: Alpha Beta Moody's credit rating Aa Baa Fixed rate borrowing cost 12.5% 16.0% Floating rate borrowing cost SOFR+0.72% SOFR+1.72% Required: a. Calculate the quality spread differential (QSD). b-1. Develop an interest rate swap in which both Alpha and Beta have an equal cost savings in their borrowing costs. Assume Alpha desires floating rate debt and Beta desires fixed rate debt. No swap bank is involved in this transaction. What rate should Alpha pay to Beta? b-2. What rate will Beta pay to Alpha? b-3. Calculate the all-in cost of borrowing for Alpha and Beta, respectively.
2. Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Company A Company B Fixed Rate 5.0% 6.4% Floating Rate LIBOR+0.1% LIBOR+0.6% Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a swap that will appear equally attractive to both companies. Answer the question by using excel and explain what did you do in all the parts.
Trial Questions o If current interest rate is 28%, a Treasury Bill with 91 days to maturity, and a face value of GH¢ 50,000 should have a market value of? o Assuming you bought a 182-day Treasury Bill with a face value GH¢20,000.00 and held it for 45 days. If you want to sell it and interest rate is currently at 25%, at what price will you sell it? UNIVERSITY OF GHANA SUSINESS SCHOOL
Question 14 As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $112,380 worth of Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initial margin of 50% and a maintenance margin of 42%. You must also set aside 100% of the cash proceeds as collateral. You decide to short as many shares as you can with the collateral you have. Pay special attention that you cannot purchase/sell/trade fractional shares. How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.
5. Suppose you buy a one-year forward contract at $65. At expiration, the spot price is $73. The risk-free rate is 10 percent. What is the value of the contract at expiration? a. impossible to tell b. $8.00 c. $7.27 d. –$8.00 e. $0.00
28. Consider a bank dealer who faces the following spot rates and interest rates. What should he set his 1- year forward ask price at? Bid So(S/E) S1.42 = €1.00 F360(S/E) A. $1.4324/€ B. $1.4358/€ C. $1.4662/€ D. $1.4676/€ Ask $1.45 = €1.00 Borrowing 4.25% APR is je 3.10% APR Lending 4% APR 3% APR
Question 3: Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Company A Company B Fixed Rate 12.0% 13.4% Floating Rate LIBOR + 0.1% LIBOR + 0.6% Company A requires a floating-rate loan; Company B requires a fixed-rate loan. Design a swap that will net a bank acting as intermediary 0.1 percent per annum and be equally attractive to both companies.
Question 3 You have been appointed as a financial consultant by the directors of Cochin Holdings. They require you to calculate the cost of capital of the company. The following information is available on the financing of the company: · R10 000 000, financial lease due in 5 years and the current yield-to-maturity is 10%. Prepare a loan amortization schedule Hint: the annuity factor is 3.7908
Assume you have taken a long position in an Amazon 1,850 Strike Price Call option. The $1,850 Strike Price Call option premium = $25. Amazon is currently trading at $1,865, the short-term interest rate = 2% and there are 2 months until expiry. Two months later, at expiration, Amazon had rallied to $1,875. What is the profit or loss on your Amazon 1,850 Strike Price Call option? (Please step by step solutions)