Question
In: Finance
Johnson Industries is currently paying a variable rate of LIBOR + 0.5% on a loan and...
Johnson Industries is currently paying a variable rate of LIBOR + 0.5% on a loan and desires fixed rate loan payment exposure. Refinancing is currently not available, so Johnson Industries decide to pursue an interest rate swap agreement. The swap terms are LIBOR for 2.5%. What is the after-swap loan cost for Johnson Industries and is it variable or fixed?
Solutions
Expert Solution
Current payment=LIBOR+0.5%
In swap, Johnson will receive LIBOR and pay 2.5%
Net payment by Johnson=2.5%+LIBOR+0.5%-LIBOR=3%
After-tax swap loan cost=3%
Fixed
jeff jeffy answered 2 years agoRelated Solutions
Company A desires a variable-rate loan but currently has a better deal from the fixed-rate market...
Company A desires a variable-rate loan but currently has a
better deal from the fixed-rate market at a rate of .13. If Company
A borrows from the variable-rate market, the cost would be
LIBOR+.02. In contrast, Company B, which prefers a fixed-rate loan,
has a better deal from the variable-rate market at LIBOR+.03. If
Company B borrows from the fixed-rate market, the cost would be
.16. Knowing both companies’ needs, Bank C designed a swap deal.
The deal is outlined...
The half-year LIBOR rate is 3.5% and the one-year LIBOR rate is 6%. Suppose that some...
The half-year LIBOR rate is 3.5% and the one-year LIBOR rate is
6%. Suppose that some time ago a company entered into an FRA where
it will receive 5.8% and pay LIBOR on a principal of $1 million for
the period between time 0.5 years and time 1 year in the future
(with semiannual compounding). The one-year risk-free rate is 4%.
What is the value of the FRA? All rates are compounded continuously
unless specified.
A person is paying back a loan at 5% effective rate, with payments at the end...
A person is paying back a loan at 5% effective rate, with
payments at the end of each year for 10 years, such that the
payment the first year is $200, the second year is $190, etc. until
it reaches $110, on the 10th year.
,Find the loan amount.
Find the principal and interest in the fifth payment.
A person is paying back a loan at 5% effective rate, with payments at the end...
A person is paying back a loan at 5% effective rate, with
payments at the end of each year for 10 years, such that the
payment the first year is $200, the second year is $190, etc. until
it reaches $110, on the 10th year.
,Find the loan amount.
Find the principal and interest in the fifth payment.
Suppose that the initial loan is $16,000 and the interest rate is 0.5% per month. Interest...
Suppose that the initial loan is $16,000 and the interest rate is
0.5% per month. Interest due is paid at end of each month. $8,000
of the original unpaid balance is to be repaid at the end of months
two and three only. How much total interest would have been paid by
the end of month three?
Tebow Trust can fund 12.75 percent fixed-rate assets with either variable-rate liabilities at LIBOR + 1...
Tebow Trust can fund 12.75 percent fixed-rate assets with either
variable-rate liabilities at LIBOR + 1 percent or fixed at 12.5
percent. Swamp Bank can fund variable-rate assets with either
fixed-rate liabilities at 11 percent or variable at LIBOR + 0.5
percent. Swamp’s variable-rate assets earn LIBOR + 1.25 percent.
Tebow and Swamp could agree on an interest-rate swap with the
fixed-rate swap payment at 11.25 percent and the variable-rate swap
payment at LIBOR .
What will be the net...
Currently, Warren Industries can sell 15-year, $1000-par-value bonds paying annual interest at a 11% coupon rate....
Currently, Warren Industries can sell 15-year,
$1000-par-value bonds paying annual interest at a 11% coupon
rate. Because current market rates for similar bonds are just under
11%, Warren can sell its bonds for $960each; Warren will incur
flotation costs of $30per bond. The firm is in the 29% tax
bracket.
a. Find the net proceeds from the sale of the bond,Upper N
Subscript d.
b. Calculate the bond's yield to maturity (YTM) to estimate
the before-tax and after-tax costs of...
A payday loan is structured to obscure the true interest rate you are paying. For example,...
A payday loan is structured to obscure the true interest rate
you are paying. For example, in Washington, you pay a $27 "fee"
for a $185 two-week payday loan (when you repay the loan, you
pay $212 ). What is the effective annual interest rate for this
loan? (Assume 26 bi-weekly periods per year.) The effective
annual interest rate is_____%.
what is the difference between the Libor rate and the federal funds rate?
what is the difference between the Libor rate and the federal funds
rate?
A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is...
A rapidly growing firm is currently paying a dividend of $90.
The dividend growth rate is expected to be 12% for the next 6
years. The dividend growth rate after the first 6 years is expected
to be 3% annually. The expected return on the market is 8%, the
risk free rate is 3% and the firm’s Beta is 25.
Calculate the estimated price (intrinsic value) for a share of
this firm’s stock.
What does this firm’s Beta measure?
Use...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Question I'm having trouble with: Using LISP, write a recursive function that takes a list and...
- Gatekeeping: What are the causal effects of AI (Artificial Intelligence) in hiring processes and how can...
- Write code that would go where the comment "#your line will go here" so that the...
- The tires of a car make 78 revolutions as the car reduces its speed uniformly from...
- Cornerstone Exercise 4.1 (Algorithmic) Applied Overhead and Unit Overhead Cost: Plantwide Rates Seco, Inc., produces two...
- 1. Price Discrimination - Two Parts Pricing: Xerox In early days, the Xerox Corporation faced the...
- answer the following using C# Design and program a Visual Studio Console project in C# that...
ADVERTISEMENT