Company A and Company B enter into a swap agreement with a notional amount of $500,000...
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Company A and Company B enter into a swap agreement with a notional amount of $500,000 for three years. Company A pays LIBOR+1.4% on a notional amount and company B pays a fixed annual rate of 5% on the notional amount to company A. Case1: If the LIBOR rate is increased Case2: If the LIBOR rate slightly increased Company A variable interest rate when the LIBOR rates increased LIBOR+1.4% Yea rs 4% 5.7% 6.7% Company A variable interest rates when LIBOR rate slightly increased LIBOR+1.4% 3% 3.8% 4.88% 1 2 3 Follow the above information to calculate the gain or loss of Company A and company B in both cases. Company A and Company B enter into a swap agreement with a notional amount of $500,000 for three years. Company A pays LIBOR+1.4% on a notional amount and company B pays a fixed annual rate of 5% on the notional amount to company A. Case1: If the LIBOR rate is increased Case2: If the LIBOR rate slightly increased Company A variable interest rate when the LIBOR rates increased LIBOR+1.4% Yea rs 4% 5.7% 6.7% Company A variable interest rates when LIBOR rate slightly increased LIBOR+1.4% 3% 3.8% 4.88% 1 2 3 Follow the above information to calculate the gain or loss of Company A and company B in both cases.
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Answer rating: 100% (QA)
Case 1 If the LIBOR rate is increased Assume the LIBOR rate increases to 1 Year 1 4 2 Year 2 57 3 Year 3 67 Interest Payments in Case 1 Year 1 Company ... View the full answer
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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