Aptim Finance Company, has accepted 3 year deposits from public to the tune of Rs. 200 crore
Question:
Aptim Finance Company, has accepted 3 year deposits from public to the tune of Rs. 200 crore at a cost of 16% and deployed the funds for a 3 year term at a floating rate of 5% above 364 day T-bill rate. Sheetal Leasing Ltd. has accessed the market for Rs. 200 crore with a 3-year floating rate bond, the interest on which is 3% above 364 day T-bill rate. These funds are deployed in a 3-year asset which gives a yield of 19.5%.
The 364 day T-bill rate turned out to be as under for each of the half-yearly payment of interest.
Time Period | 364 day T-bill rate |
6 month | 13.98% |
12 month | 14.10% |
18 month | 14.20% |
24 month | 14% |
30 month | 13.95% |
36 month | 13.75% |
1) Arrange a Swap transaction so that Aptim Finance earns a spread of 4%.
2) At the end of 3 years swap arrangement, who is benefitted by the swap arranged by you on terms of the spread (compare swap versus no swap positions)?
Essentials of Business Communication
ISBN: 978-1111821227
9th edition
Authors: Mary Ellen Guffey, Dana Loewy