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*E17-24B (Cash Flow Hedge) On January 1, 2014, NorthLake Office Services issues a 10-year, $1,000,000 note at LIBOR plus 1%, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 5.2%. NorthL

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*E17-24B (Cash Flow Hedge) On January 1, 2014, NorthLake Office Services issues a 10-year, $1,000,000 note at LIBOR plus 1%, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 5.2%.;NorthLake decides it prefers fixed-rate financing and wants to lock in a rate of 7%. As a result, North- Lake enters into an interest rate swap to pay 7% fixed and receive LIBOR plus 1% based on $1 million. LIBOR increases to 5.9% on January 1, 2015.;Instructions;(a) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2014.;(b) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2015.

 

Paper#78444 | Written in 18-Jul-2015

Price : $27
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