Question
In: Finance
ABC company has a $10 million loan maturing in 3 months that it plans to roll...
ABC company has a $10 million loan maturing in 3 months that it plans to roll over for a further six months. The company treasurer feels that interest rates will be higher in three months when rolling over the loan. Suppose the current 6-month LIBOR rate is 1.9%.
a) Explain how ABC company can use an FRA at 2% from Banque Paribas to lock in a guaranteed six-month rate when it rolls over its loan in three months (e.g. buy/sell an FRA, underlying principle, what rate will apply and when).
b) In three months, 6-month LIBOR turned out to be 1.75%. How much will ABC company receive/pay on its FRA?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
ABC company has a $10 million loan maturing in 3 months that it plans to roll...
ABC company has a $10 million loan maturing in 3 months that it
plans to roll over for a further six months. The company treasurer
feels that interest rates will be higher in three months when
rolling over the loan. Suppose the current 6-month LIBOR rate is
1.9%.
a) Explain how ABC company can use an FRA at 2% from Banque
Paribas to lock in a guaranteed six-month rate when it rolls over
its loan in three months (e.g. buy/sell...
Ford has a $20 million Eurodollar deposit maturing in two months that it plans to roll...
Ford has a $20 million Eurodollar deposit maturing in two months
that it plans to roll over for a further six months. The company's
treasurer feels that interest rates will be lower in two months’
time when rolling over the deposit. Suppose the current LIBOR 6
month rate is 7.875%.
a. Explain how Ford can use an forward rate agreement (FRA) at
7.65% from Banque Paribas to lock in a guaranteed six-month deposit
rate when it rolls over its deposit...
1. Ford has a $20 million Eurodollar deposit maturing in two months that it plans to...
1. Ford has a $20 million Eurodollar deposit maturing in two
months that it plans to roll over for a further six months. The
company's treasurer feels that interest rates will be lower in two
months’ time when rolling over the deposit. Suppose the current
LIBOR 6 month rate is 7.875%.
a. Explain how Ford can use an forward rate agreement (FRA) at
7.65% from Banque Paribas to lock in a guaranteed six-month deposit
rate when it rolls over its...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate....
On January 1, 2021, the company obtained a $3 million loan with
a 10% interest rate. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
$
1,300,000
March 1, 2021
720,000
June 30, 2021
340,000
October 1, 2021
640,000
January 31, 2022
450,000
April 30, 2022
765,000
August 31, 2022
1,260,000
On January 1, 2021, the company obtained a $3 million construction
loan with a 10% interest rate. Assume the $3...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate....
On January 1, 2021, the company obtained a $3 million loan with
a 10% interest rate. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
$
1,300,000
March 1, 2021
750,000
June 30, 2021
300,000
October 1, 2021
650,000
January 31, 2022
495,000
April 30, 2022
810,000
August 31, 2022
1,350,000
On January 1, 2021, the company obtained a $3 million construction
loan with a 10% interest rate. Assume the $3...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate.....
On January 1, 2021, the company obtained a $3 million loan with
a 10% interest rate.. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
$
1,000,000
March 1, 2021
600,000
June 30, 2021
800,000
October 1, 2021
600,000
January 31, 2022
270,000
April 30, 2022
585,000
August 31, 2022
900,000
On January 1, 2021, the company obtained a $3 million
construction loan with a 10% interest rate. Assume the $3...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate....
On January 1, 2021, the company obtained a $3 million loan with
a 10% interest rate. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
$
1,300,000
March 1, 2021
750,000
June 30, 2021
300,000
October 1, 2021
650,000
January 31, 2022
495,000
April 30, 2022
810,000
August 31, 2022
1,350,000
On January 1, 2021, the company obtained a $3 million construction
loan with a 10% interest rate. Assume the $3...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate.....
On January 1, 2021, the company obtained a $3 million loan with
a 10% interest rate.. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
$
1,000,000
March 1, 2021
600,000
June 30, 2021
800,000
October 1, 2021
600,000
January 31, 2022
270,000
April 30, 2022
585,000
August 31, 2022
900,000
On January 1, 2021, the company obtained a $3 million
construction loan with a 10% interest rate. Assume the $3...
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate....
On January 1, 2021,
the company obtained a $3 million loan with a 10% interest rate.
The building was completed on September 30, 2022. Expenditures on
the project were as follows:
January 1, 2021
$
1,300,000
March 1,
2021
750,000
June 30,
2021
300,000
October 1,
2021
650,000
January 31,
2022
495,000
April 30,
2022
810,000
August 31,
2022
1,350,000
On January 1, 2021, the company obtained a $3 million construction
loan with a 10% interest rate. Assume the $3...
A property has a maturing loan and needs to be refinanced. It is appraised at $25...
A property has a maturing loan and needs to be refinanced. It is
appraised at $25 million based on a cap rate of 6%. Your lender has
put two constraints on your next loan. It must have debt service
coverage of 1.5x and LTV of 50%. Interest rates are 5%
and the lender offers you a 10-year loan with a 20- year
amortization schedule.
Which constraint limits your loan?
How much can you borrow?
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