Question: On January 2, 2019, MacCloud SA issued a 4-year, 100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note

On January 2, 2019, MacCloud SA issued a 4-year, €100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note.
As a result, on January 2, 2019, MacCloud enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.7% for the first 6 months on €100,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.7% on June 30, 2019.
Instructions
a. Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2019.
b. Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2019.

Step by Step Solution

★★★★★

3.45 Rating (174 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a 63019 b 123119 Fixedrate debt 100000 100000 Fixe... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1353-B-M-A-I(4367).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!

On January 2, 2014, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on...

Fair Value Hedge) On January 2, 2010, Mac Cloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. Mac Cloud now wants to change the note to a variable-rate note....

On January 1, 2014, K-Store Inc. issued a 10-year, $500,000 note at 8% fixed interest, interest payable semiannually. K-Store preferred a variable-rate note, but its lender offered only fixed-rate...

*E16.25 (LO 6) (Fair Value Hedge) On January 2, 2025, MacCloud SA issued a 4-year, 100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a...

On January 2, 2022, MacCloud SA issued a 4-year, 100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on...

On January 2, 2020, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variablerate note. As a result, on...

*E17-24 (L06) (Fair Value Hedge) On January 2, 2017, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a...

On January 2, 2025, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variablerate note. As a result, on...

On January 2 , 2 0 2 2 , ABC Co . issued a 4 year, $ 1 0 0 , 0 0 0 note at 6 % fixed interest, interest payable semiannually. ABC Co . now wants to change the note to a variable - rate note. AS a...

On January 2, 2012, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on...

Tradesmen Auto purchased an asset in 2015 for $300,000. It was sold in 2017 for $330,000 and a replacement asset was purchased for $400,000. In July 2019 the asset was sold for $260,000. The asset...

Jennifer Farmer farmed for 36 years. She has recently sold her farm assets. Her primary crop was asparagus, and 20 of Jennifers 25 hectares of land were devoted to growing this vegetable. The land...

Which of the following statements is correct? A firm's weighted average cost of capitalshould decrease if its tax rate increases, but the yield to maturity of its noncallable bonds remains the same...

Does the current U.S. patent law increase or decrease the rate of innovation?

Access the financial statements of Deutsche Lufthansa AG for the year ended December 31, 2011. These can be found at the company's website (investor-relations.lufthansa.com). Instructions (a) Discuss...

The 2014 income statement of Schmidt Corporation showed net income of $1,230,000 and a loss from discontinued operations of $105,000. Schmidt had 40,000 common shares outstanding all year. (a)...

Ethan Corporation had 100,000 common shares outstanding on December 31, 2013. During 2014, the company issued 12,000 shares on March 1, retired 5,000 shares on July 1, issued a 20% stock dividend on...

please answer this question with work shown 4. An investment is expected to yield $700 in three years, $900 in five years, and $1100 in seven years. What is the present value of this investment if...

Consider the following information: Calculate the expected return for Stock A. Calculate the expected retum for Stock B. Calculate the standard deviation for Stock A. Calculate the standard deviation...

Midiand Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and Maintenance) During July, the following costs and service...