CH16 - Chapter 16 Other Derivatives 16-1 Floating Rate Note...

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Unformatted text preview: Chapter 16 Other Derivatives 16-1 Floating Rate Note Short term Interest = Interest + Pr emium Rate Rate Index 16-2 Interest Rate Swap Firm L 9.15% LIBOR + 0.10% 9% Swaps dealer 9.30% LIBOR + 0.10% Firm S [LIBOR + 1.30%] Fixed rate loan Floating rate loan 16-3 Fixed and Floating Rates for Firms L and S Firm L Firm S Fixed Rate 9% 11% Floating Rate LIBOR + 0.30% LIBOR + 1.30% 16-4 Interest Paid in Swaps Interest Paid and Received by Firm L in the Swap Pays Interest on Long-Term Fixed-Rate Bond Receives Fixed Rate from Swaps Dealer Pays Floating Rate to Swaps Dealer Net -9% 9.15% -[LIBOR + 0.10%] -[LIBOR 0.05%] Interest Paid and Received by Firm S in the Swap Pays Interest on Short-Term Floating-Rate Loan -[LIBOR + 1.30%] Pays Fixed Rate to Swaps Dealer -9.30% Receives Floating Rate from Swaps Dealer +[LIBOR + 0.10%] Net -10.50% 16-5 Convertible Bonds $ Co nv ib ert le c p ri e Stock value Call price lu ond va tb e Par Straig h Issue date Maturity Time 16-6 ...
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This note was uploaded on 06/07/2011 for the course FIN 4243 taught by Professor Dudley during the Spring '08 term at University of Florida.

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CH16 - Chapter 16 Other Derivatives 16-1 Floating Rate Note...

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