You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD (New Zealand dollar) at a spot rate of NOK/NZD 4 and the seven-year swap rates of 7 percent (NZD) and 8 percent (NOK). What are the payments on the loan, on the swap, and on the combination of them? Is there a gain if you could have borrowed NZD at 9 percent?
Q: You are trying to decide between the following two projects: Cash Flows ($ thousands) Project :…
A: A common tool for making financial decisions is NPV. It aids in determining if a project or…
Q: Use the following information to answer five questions related to the Abnormal Earnings Model; The…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: You are given the following information: Stock A has a beta of 0.95, a standard deviation of 52%…
A: Stock A:Beta = = 0.95Expected Return = E(Ra) = 11.575%Stock B:Beta = = 1.00Expected Return = E(Rb)…
Q: (b) If interest rates drop to 11%, approximately how much more can you borrow without increasing…
A: Using the contour table, we can determine the approximate monthly amount that needs to be paid for a…
Q: A 6-year term insurance policy has an annual premium of $500, and at the end of 6 years, all…
A: In case of a term insurance policy we pay annual premiums.The premium is a stream of fixed and…
Q: Even though most corporate bonds in the United States make coupon payments semiannually, bonds…
A: A bond is a kind of debt security issued by the government and private companies for raising funds…
Q: A 50- year project has a cost of $500,000 and has annual cash flows of $100,000 in years 1-25, and…
A: Time = 50 yearsInitial Cost = $500,000Cash flow for Year 1-25 = $100,000Cash flow for Year 26-50 =…
Q: After successfully completing your corporate finance class, you feel the next challenge ahead is to…
A: Straight voting refers to the voting scheme in which directors are to be elected by the shareholders…
Q: How much interest (to the nearest dollar) would be saved on the following loan if the condominium…
A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…
Q: (a) The transferring of risk onto the clearing house is not something unique to futures…
A: A short position in a futures contract is when an investor sells a stock without owning them.The…
Q: XYZ Corporation is considering two investment projects. Project A requires an initial investment of…
A: The NPV of the project refers to the measure of its profitability by discounting the cash flows to…
Q: FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock…
A: WACC stands for a weighted average cost of capital, which is the total cost of a company's capital…
Q: I have to enter this information into an excel spread sheet but I cannot figure out what should go…
A: Simple interest is the concept, where the interest does not compound. It uses a different formula…
Q: Shooting Star, Inc. is considering a project that would have an eight -year life and would require a…
A: According to bartleby guidelines, if question involves multiple subparts, then 1st sub 3 parts…
Q: Matterhorn Corporation stock currently sells for $64.33 per share. The market requires a return of…
A: Investors have different options to make investments, and the motive behind investments is to…
Q: Connie wants to have an annuity payment of $2,050 at the end of every three months. How much should…
A: Annuity amount, P = $2,050 Interest rate per period, r = Number of compounding periods, n =
Q: given the following information for the Buster Bronco company. There are 9700 bonds outstanding with…
A: Preferred equity is also called hybrid security and have features of bond and equity both. They are…
Q: u purchase 2,000 shares of Nice Kick Group (NKG) at $45 per share by giving your broker $60,000 to…
A: When you start trading at broker than you have to pay initial margin money and later on to keep…
Q: Zozan Corp. manufactures Hydrogen engines automobiles. The variable cost is $41,000 per unit, and…
A: To determine whether the firm should fill the order for a repeat customer, we need to analyze the…
Q: You bought a 22.0-year, 9.08% semi-annual coupon bond today and the current market rate of return is…
A: Price of bond is value today based on market interest of coupon payment to be received in future and…
Q: asyAir plc is an airline. It has 20 million ordinary shares currently trading on the stock market at…
A: Present value factor for future value and the present value factor for annuity are calculated as…
Q: Company B is expected to pay dividends of $0.5 every 3 months for the next 4 years. If the current…
A: Future Value refers to the future compounded value of all the future cash flows added to the future…
Q: Suppose that $1,000 is invested at 4% interest compounded continuously. Use the formula A = Pert.…
A: A = $1,250 P = $1,000 r = 4% = 0.04
Q: A firm has net income of $500,000 and sales of $18,000,000. Its interest expense is $180,000 and the…
A: Net Income = ni = $500,000Sales = s = $18,000,000Interest Expenses = i = 180,000Tax rate = t = 30%
Q: OMG Inc. has 4 million shares of common stock outstanding, 3 million shares of preferred stock…
A: In the given case, we have provided the number of common stock outstanding, preferred stock…
Q: Arnold Inc. is considering a new project that requires use of an existing warehouse, which the firm…
A: NPV ( Net present value ).NPV is a capital budgeting technique used for making investment…
Q: Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as…
A: After tax salvage value, which is a cash inflow, is calculated as shown below.
Q: a. Calculate the profitability index for each investment. (Do not round intermediate calculations…
A: Profitability Index or PI is the ratio of present value of operating cash inflows to the present…
Q: A firm has two mutually exclusive investment projects to evaluate. The projects have the following…
A: Equivalent annual annuity of the project is the annuity for the net present value of project cash…
Q: currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock…
A: The initial investment= 600*$40 = $24,000JKL value of stock = [75,000 -($1 million/$40)] *$40 = $2…
Q: Problem 5-10 Calculating Perpetuity Values [LO 1] The Maybe Pay Life Insurance Company is trying to…
A: Perpetuity value is the present value of payments where the payments happen forever. It is the…
Q: Given the following probability distribution, what is the standard deviation of returns for Security…
A: The standard deviation of the stock or security helps us know the risk level of the stock. A higher…
Q: Munoz Manufacturing Company has an opportunity to purchase some technologically advanced equipment…
A: Introduction:Internal rate of return (IRR ) of a project is the discount rate which makes net…
Q: B eBook Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to…
A: Assume the Hong Kong Dollar (HK$) value is tied to the U.S. Dollar and will remain tied to the U. S…
Q: Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The…
A: Growth valuation model refers to the technique of finance used for calculating the intrinsic value…
Q: Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.4 percent, a…
A: A premium bond is a bond that has a market price greater than its par value.Premium bonds trade at a…
Q: No More Pencils, Incorporated, disburses checks every 1 week) that average $55,000 and take 7 days…
A: Interest is the rate of return on the funds. It is calculated based on the amount invested.
Q: (Present value of an uneven stream of payments) You are given three investment alternatives to…
A: Present value of Investment is calculated with the help of cash flows and discount rate. The cash…
Q: which of the following past returns should mutual funds publish in their annual reports? A. Excess…
A: Mutual fund these are the type of investment in which there is large pool of money from money…
Q: ng-term debt of $200,000 at an interest rate of 7% p.a. One of the agenda items in its AGM is to…
A: EPS (Earnings per share) is calculated as shown below.
Q: Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different…
A: Old Portfolio Beta = 1.35Total Number of stock = 20Beta of Sold Stock = 1.0Beta of purchase Stock=…
Q: rockett Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require…
A: Project A-Using a financial calculator, input the following data-CF0= -11000, CF1= 6000, CF2= 8000…
Q: An actor invests some money at 5%, and $41000 more than four times the amount at 7%. The total…
A: Each and every deposit carry some amount of interest and interest is amount of profit earned over…
Q: in the past five years. Assuming that the tax rate is 25% and that these figures will be sustained…
A: Free cash flow (FCF) is a financial metric used to measure the amount of cash that a business…
Q: Intro We know the following expected returns for stocks A and B, given different states of the…
A: According to bartleby guidelines, if question involves multiple subparts, then 1st sub 3 parts…
Q: A fem raises capital by selling $30,000 worth of debt with flotation costs equal to 1% of its par…
A: A firm can raise debt through two main means – debt and equity.Debt refers to borrowings made by a…
Q: Calculate the monthly finance charge for the credit card transaction. Assume that it takes 10 days…
A: To calculate the monthly finance charge using different methods, let's consider the given…
Q: Noah has $4686 in his savings account today. The interest rate is 8,3% p.a. compounded monthly. Noah…
A: Loan amortization refers to the process of gradually paying off a loan through regular installment…
Q: Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7 Stock X 7% 1% -2% -3% 5% 11% 5%…
A: PeriodStock XStock Y10.07-0.0420.010.13-0.020.044-0.030.0850.050.0760.11-0.0170.05-0.03Required:The…
Q: Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions):…
A: A WACC computation takes into account all sources of capital, including preferred stock, common…
You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD (New Zealand dollar) at a spot rate of NOK/NZD 4 and the seven-year swap rates of 7 percent (NZD) and 8 percent (NOK).
What are the payments on the loan, on the swap, and on the combination of them?
Is there a gain if you could have borrowed NZD at 9 percent?
Step by step
Solved in 3 steps
- You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD (New Zealand dollar) at a spot rate of NOK/NZD 4 and the seven-year swap rates of 7 percent (NZD) and 8 percent (NOK). What are the payments on the loan, on the swap, and on the combination of them? Is there a gain if you could have borrowed NZD at 9 percent? Outline the cash flows in the amount and currency of both the inflows and outflows) associated with (i) the NOK loan, (ii) the swap (fixed interest at 7% in NZD for fixed interest at 8% in NOK), and the resulting combined net cash flows. These should include the principal exchanges upfront and at maturity as well as the flows of interest over the length of the swap.DVR Inc. can borrow dollars for five years at a coupon rate of 2.84 percent. Alternatively, it can borrow yen for five years at a rate of .94 percent. The five-year yen swap rates are 0.73–0.70 percent and the dollar swap rates are 2.50–2.53 percent. The currency ¥/$ exchange rate is 87.620. Determine the dollar AIC and the dollar cash flow that DVR Inc. would have to pay under a currency swap where it borrows ¥1,750,000,000 and swaps the debt service into dollars. Borrow: Swap:Provide accurate solution with explanation of all the requirements. Use excel calculations with excel formulas. Provide solution ASAP.You are an American investor who can borrow $1,000,000 or the equivalent amount in euros today. Suppose the spot rate is $1.18/€, and the one-year forward rate is $1.15/€. The annual interest rate is 4 percent in the U.S. and 2 percent in Germany. Check if IRP holds. If it does not hold, set up a covered interest arbitrage. What will be your profit from this arbitrage opportunity in dollars?
- BIDV can borrow either AUD10 million or $5 million. The current spot rate of the AUD is $0.48 and AUD will increase to $0.5 in the next 5 days. Furthermore, BIDV expects the spot rate of the euro to be $1.10 in 90 days. Today, U.S. Dollar ($) lending rate is 7.10% and borrowing rate is 7.50%. On the other hand, AUD lending rate is 6.80% and borrowing rate is 7.25%. If BIDV's forecast is correct, what will its dollar profit be from speculation over the five-day period? (assuming it does not use any of its existing consumer deposits to capitalize on its expectations) (Write down the number only, no currency symbol, round up to 0 decimal number, assume that 1 year has 360 days)Suppose you have a 2.5-year remaining on an interest rate swap with a notionalprincipal of $10, 000, 000 between Company A and Company B. Company A pays fixed rateand Company B pays the float rate. Fixed and float payments are exchanged every year andthe last payment was exchanged 6 months ago. The fixed rate is 3.5% per annum, and thefloating rate is tied to the annual LIBOR. The previous 1-year LIBOR rate, set 6 months ago,is 2.75%, 6 month LIBOR is 3.25%. the 1.5-year LIBOR is 3.25%, and the 2.5-year LIBOR is3.50%.Calculate the present value of the fixed and floating legs of the swap, and determine the swap’snet present value from Company A’s perspective. Assume annual compounding for discounting.Current USD Interest rates are 7% per annum and AUD rates are 9% per annum, flat for all terms. Current value of AUD is 0.62 USD. Under a FX swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. Notional principals are 12 Million USD and 20 Million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last 5 more years. What is the value of the swap to the financial institution?
- An investor starts with 1 million and converts them to £694,500, which is then invested for one year. In a year the investor has £736,170 which she then converts back to euros at an exchange rate of 0.68 pounds per euro. What way the annual euro rate of return earned?An investor has $10m to invest and has the following options: 1) depositing it in a US bank account paying 3% annually, or 2) depositing it in a German bank, where the annual rate of interest is only 2%. Assume that today the current spot exchange rate for the Euro is given as $1.2750, while the 1-year Dollar-Euro forward rate is posted as 1.2995. a. Based on your knowledge of the relationship between interest rate differentials and the current dollar-euro forward premium or discount, in which country should the investor deposit her money? why? b. If you had the power to adjust the German interest rate, with all else constant, what rate would you establish, such that the investor is totally indifferent between depositing in either countries? Show your work and the logic behind it.The US risk-free rate is 8% and the Mexico rate is 7%. The spot and 10-month forward exchange rates are 20.9 and 19.9 peso/$, respectively. Find the covered interest arbitrage profit (expressed in $) you'll make in10 months if you can borrow either $1M or its equivalent in pesos?
- 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? (eg 5.10% = 0.051)Let's imagine that the OIS rates for one year and two years are 2% and 4% respectively. Now, let's examine an OIS swap set to mature in two years, where you receive a fixed rate of 3% and pay the floating reference rate. The principal amount involved is 1 million. If payments are made annually with annual compounding, what is the value of the swap? (a)−558.4 (b) −188.5 (c) 0 (d)188.5 (e) 558.4The current spot GBP/USD rate is 1.9455 and the three-month forward rate is 1.9173. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be 1.9252 in three months. Assume that you would like to trade £5,000,000 in the forward market. What would be your speculative profit in dollar terms if the spot exchange rate actually turns out to be 1.9000. (USD, no cents)