78 79 80 81 A 82 B 83 D 84 A 85 B 86 C 87 A 88 B 89 D 90 p 342 C 91 C 92 B 93 C

78 79 80 81 a 82 b 83 d 84 a 85 b 86 c 87 a 88 b 89 d

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78. 79. 80. 81. A82. B83. D84. A85. B86. C87. A88. B89. D
90.(p. 342) C91. C92. B93. C94. Firm A could agree to a swap at the pound ask price, agreeing to pay 4.1% to the swap bank in exchange for receiving USD LIBOR while at the same time agreeing to a USD swap at the bid price, agreeing to pay USD LIBOR in exchange for receiving $6%.95. Firm B could agree to a swap at the pound BID price, agreeing to RECEIVE 4.0% to the swap bank in exchange for paying USD LIBOR while at the same time agreeing to a USD swap at the ask price, agreeing to recieve USD LIBOR in exchange for paying $6.1%.The IRR on a 30m loan with payments of 1,766,037.74 and 30,611,320.75 is 4%They also enter into a 2-year forward contract on euro agreeing to buy enough dollars with euro to service their loan. At the 2-year forward rate of $1.5577 this will cost 1.06×$60m × 1.00/$2.0777 = 30,611,320.75 at the end of the second year.Then they could enter a 1-year forward contract on euro agreeing to buy enough dollars with pounds to service their loan. At the 1-year forward rate of $2.0385/this will cost .06×$60m × 1.00/$2.0385 = 1,766,037.74 in one year.96. Firm A could borrow $60m today and exchange for 30m at today's spot rate.97. Since A can redenominate a $60m 6% loan into a 30m 4% loan, they won't be very interested in swaps with an all-in-cost very much higher than 4%.
The IRR on a $65m loan with payments of $2,446,153.85 and $60,823,076.92 is 6%They also enter into a 2-year forward contract on euro agreeing to buy enough dollars with euro to service their loan. At the 2-year forward rate of $1.5577 this will cost 1.04 × 30m × 2.0777/1.00 = $60,823,076.92 at the end of the second year.Then they could enter a 1-year forward contract on euro agreeing to buy enough pounds with dollars to service their loan. At the 1-year forward rate of $2.0385/this will cost .04 × 30m ×$2.0385/1.00 = $2,446,153.85 in one year.98. Firm B could borrow 30m today and exchange for at $60m today's spot rate.99. Since B can redenominate a 30m 4% loan into a $60m 6% loan, they won't be very interested in swaps with an all-in-cost very much higher than $6%.100.
14 SummaryCategory# of QuestionsEun - Chapter 14103

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