The BF Goodrich-Rabobank Interest Rate Swap Case Section AC-G9 Kurtuluz Korkmaz - Murat Ongider - Jonathan Levi - Sumita Marwah 1. Is this an attractive alternative for the savings banks? Early in 1983‚ BF Goodrich‚ diversified manufacturer of tires and related rubber products‚ needed $50M to fund its ongoing financial needs. It could have borrowed this amount from its committed bank lines‚ with borrowing cost above the prime‚ which was 10 5/8 %. It wanted borrow longer term with fix
Premium Bond
amount to be received (or paid) by the counterparty on this interest rate swap each year based on the forecasts of LIBOR assumed above. ANSWER: Year 1 = $0; Year 2 = $1‚000‚000 paid; Year 3 = $1‚500‚000 paid 2. Interest Rate Caps. Northbrook Bank purchases a four-year cap for a fee of 3 percent of notional principal valued at $100 million‚ with an interest rate ceiling of 9 percent‚ and LIBOR as the index representing the market interest rate. Assume that LIBOR is expected to be 8 percent‚ 10
Premium Foreign exchange market United States dollar Futures contract
COAST4LIFE INC Memorandum To :Coast4life Inc From: Pat Brown‚ CMA Subject: Options for Cost savings and revenue generation Introduction: Coast4life Inc with the expected downturn situation due to recent terrorist attack on a cruise ship in 2012 and on airline industry would prepare to remain profitable by finding ways to cut cost or generate additional revenue. Target is to recommend the best among the four alternative as directed and aiming at 16% after tax return and tax
Premium Earnings before interest and taxes Laborer Profit
that is inevitably gave up. For example‚ if a person invests in equity and get 3% return over a period of time then by investing his/her money on stock that person gave up the opportunity of another investment. Opportunity cost rate is used as an interest rate (discounting factor) to calculate present value of future cash flow. To compute present value‚ future value is divided by (1 + r) in each year. Therefore‚ in time line opportunity cost is shown in between two cash flows. No the opportunity
Premium Investment Time Time value of money
irregular payment Prepare an amortization schedule Nature of Amortization Amortization Refers to the process of liquidating by installment the payments (at a regular interval) of a loan or debt‚ including the interest charges By the process of amortization‚ the principal and the interests are reduced by a series of installment payments made either at the beginning or at the end of the payment interval Implies that the amount regularly paid to discharge an obligation is of equal size Note: in
Premium Interest Money Time value of money
Treasury Risk Management CURRENCY AND INTEREST RATE SWAP _A CASE STUDY OF THE AUSTRALIAN FOREIGN EXCHANGE MARKET_ ABSTRACT Business transactions occur on the international front and there are laws and regulations regarding the pricing of the long-term forward exchange contracts. It is noted that the violation of the traditionally covered interest arbitrage pricing relation has been rampant and that the activity in the international currency and interest rate swap markets offers a substantial
Premium Foreign exchange market
Amortization Problems 1. Construct the amortization schedule for a $20000 debt that is to be amortized in 8 equal quarterly payments at an annual rate of 12 % compounded quarterly on the unpaid balance. First‚ determine the size of the payments‚ PMT = _________? |Payment # |size of payment |interest paid |balance paid |unpaid balance | | | | j = 0.03 | |$20000
Premium Money Time Payment
are planted‚ what will be the average rate of return on the investment? What will be the rate of return on the marginal investment? (e) If a capital market exists‚ and the rate of interest is 33 31 %‚ what will be your optimal investment? (f) If you have no corn at date 0‚ a capital market exists (33 13 % rate of interest)‚ and you invest optimally‚ what is your equity in the venture? What will be your optimal consumption plan? Outline your sources and uses of funds for date 0 and date 1. (g) Will
Premium Time value of money Interest Rate of return
would have been the value of the fund in 1990? 2. Here is a series of cash flows with an interest rate of 8% per period: End of period 1-5 6-10 Project X $1000 2000 Project Y $2‚000 1‚000 a. Find the equivalent present values of the two projects. b. Find the equivalent values of the two projects at the end of 10 periods. c. Find the equivalent uniform series of the two projects. 3. Assuming an (effective) interest rate of 10% per annum: a. How much must be invested today in order to provide an annuity
Premium Investment Money Rate of return
FINAL EXAMINATION: BUSINESS 312 Instructions: This examination is open book and open notes. Time limit is exactly 3 hours‚ no extensions. Return this question sheet with your answers. 1. (10 marks) Consider two firms that are identical other than their share prices‚ their dividend growth rate‚ and their rates of return on equity. Which of these two firms has the greater dividend yield? Explain. Use no numerical examples in your answer. 2. (10 marks) A public firm is considering
Premium Bond Time value of money Stock