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1. A swap bank makes the following quotes for 5-ye...

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1. A swap bank makes the following quotes for 5-year swaps and AAA-rated firms:? USD Bid - 5% Ask - 5.2% EURO Bid - 7% Ask- 7.2% A.The bank stands ready to pay $5.2% against receiving dollar LIBOR on 5-year loans. ?B. The bank stands ready to receive ?7% against receiving dollar LIBOR on 5-year loans. ?C. The bank stands ready to receive ?7% against receiving dollar LIBOR on 5-year loans.? D. None of the above 2. Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown below: COMPANY X Fixed- Rate Borrowing Cost - 10% Floating -Rate Borrowing Cost - LIBOR COMPANY Y Fixed- Rate Borrowing Cost - 12% Floating -Rate Borrowing Cost - LIBOR + 1.5% A swap bank proposes the following interest only swap: X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR - 0.15%; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 9.90%. ??What is the value of this swap to company X? ??A. Company X will lose money on the deal. ?B. Company X will save 5 basis points per year on $10,000,000 = $25,000 per year.? C. Company X will only break even on the deal? D. Company X will save 25 basis points per year on $10,000,000 = $5,000 per year ?E. None of the above,Hello I really need both answers as soon as possible Thanks a lot Gabriela,Hello Rachel!!! Thanks a lot, but I also need the procedure of both questions Could you help me by sending me the procedures of how you get to the answers pleeeease :) Thanks Gaby

 

Paper#7137 | Written in 18-Jul-2015

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