The Bf Goodrich-Rabobank Interest Rate Swap Case

(d) $1 billion 10 year debenture @ 7.5% with 18.18 warrants at $ 55 exercisable until 1988.

academic year interest rate of 3.76 percent would pay a 5,032 dollars interest over 10 years,

How much would you pay for a security that pays you $500 every 4 months for the next 10 years if you require a return of 8% per year compounded monthly?

The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

| |finance the balance. How much will each monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per |

In addition, he needs to borrow $173.5 at the risk-free borrowing rate of RF,b . The

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

g. The $15,000 long-term note is an 8%, 5-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2011.

2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much

1. Based on the 10 percent compensating balance requirement, how much would Pierce Control Systems have to borrow to acquire $10 million in needed funds?

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

The reason why Butler Lumber Co. is considering finding a different line of credit is because they’ve nearly exhausted all their usable credit with Suburban National Bank, using up $247,000 of the $250,000 of the credit limit. To compile this issue, the bank is wishing to secure the loan with some of Butler’s property. Considering the company’s large debt ratios, they have decided to check with Northrop National Bank’s offer to extend their line of credit by $215,000.

Phase 2: BSB is raising money and will pay interest. Take short position (sell futures contract). If spot interest rates increase, futures interest rates will typically also increase so that the value of the futures position will likely decrease. So we will gain from the short position in the future’s market, which would offset any loss in the cash market due to interest rate decline. Similarly, if the interest rates fall, the value of the futures contract would increase and one will loss money from the short position in the futures market. Therefore, the gains in the spot market would be offset by the loss in the futures market. Hence, the bank will be immunized from losses.

The market value of debt was calculated using the existing yield of maturity on a 5 yar bond issued on a private placement basis on July 1, 2000. With the coupon of 5.75% and the discount price of 97, YTM for this bond is 6.62%. With a discount price being 97, the market value of debt is 17,654M.

Since Goodrich has BBB- credit rating it could raise capital at a fixed rate probably at 12.5% for 7-10 years.