Ford has a 5 year $100m fixed rate loan with Citibank at 0.061 (annual rate). Ford now thinks rates will go lower and calls Goldman Sachs for a swap and receives a quote of 0.029 / 0.030 (annual rate) against 6m LIBOR flat and executes the swap. Assume at the next rate reset, 6m LIBOR is 0.018 (annual rate). What is Ford's net effective annual interest rate for that rate reset in decimal terms to three decimal places?

Ford has a 5 year $100m fixed rate loan with Citibank at 0.061 (annual rate). Ford now thinks rates will go lower and calls Goldman Sachs for a swap and receives a quote of 0.029 / 0.030 (annual rate) against 6m LIBOR flat and executes the swap. Assume at the next rate reset, 6m LIBOR is 0.018 (annual rate). What is Ford's net effective annual interest rate for that rate reset in decimal terms to three decimal places?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 3SBD

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