Question: current fixed swap rate for a 5 year interest rate swap is 1.17%. Stagecoaches, Inc. has $100,000,000 in 5-year floating rate debt with an interest

current fixed swap rate for a 5 year interest rate swap

current fixed swap rate for a 5 year interest rate swap is 1.17%.

Stagecoaches, Inc. has $100,000,000 in 5-year floating rate debt with an interest rate of LIBOR + 3.0% and quarterly payments. Describe how the firm can use an interest rate swap to create a net fixed rate on the debt. Given the current fixed-rate on a 5-year swap, what is the company's net fixed rate (including the swap)? Build a spreadsheet to show that the firm's net interest payment remains constant when LIBOR changes

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Chapter 7: 1. Given the following yield curve: Maturity (years) LIBOR zero rate per annum (continuously compounded) 8% 9% 4 10% 11% a) If you are asked to quote a 5-year at-the-market interest rate...

An Insurance company ABC has long duration liability (~10 years duration). ABC buys Ford Motor Credit floating rate Bond which pays a floating rate coupon at US Libor+300 bps which is priced at $100....

Given the following yield curve: Maturity (years) LIBOR zero rate per annum (continuously compounded) 1 7% 2 8% 3 9% 4 10% 5 11% a) If you are asked to quote a 5-year at-the-market interest rate swap...

Construct the Debt Schedule (use $ millions) and calculate the Weighted Average Annual Interest Rate of the Floating Rate Bank NextCorp secured a bank loan from Sapring Bank with the following terms:...

I would like to know if someone can assist with inputting the formulas into the Excel spreadsheets..... Answers are provided, however, the formulas were omitted. Week 9 Chapter 21: Problems 3(a-e),...

Q3: Regarding Markits equity portfolio, the index forward price is closest to? A. 1452.64 B. 1469.71 C. 1473.73 Q4: Regarding Markits equity portfolio, the value of the forward is closest to: A....

1 . American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2020, AIPC had excess commodity inventories carried at acquisition cost of $1,000,000. These...

Sonal Johnson is risk manager for a bank. She manages the banks risks using a combination of swaps and forward rate agreements (FRAs). Johnson prices a three- year Libor- based interest rate swap...

Sonal Johnson is a risk manager for a bank. She manages the banks risks using a combination of swaps and forward rate agreements (FRAs). Johnson prices a three- year Libor- based interest rate swap...

Acme Corporation enter into a 5-year $1.600,000,000.00 term loan with JP Mortan bank on Pamuary 1.2020. JP Morgan is the lead with 50% and has syndicated thic risk of the remaining turun debt as...

It is desirable to use well-designed controllers to maintain building temperature with solar collector space-heating systems. One solar heating system can be described by [10] dx1/dt = 3x1 + u1 + u2...

What is the present value of a perpetuity stream of cash flows that pays $50,000 at the end of Year 1 and then grows at a rate of 6 percent per year indefinitely? The rate of interest used to...

What impediments to pursuing this project do you think existed within GM?

what are the factors that shape your organization external competitiveness to recruit and retain employees

1 What is the relationship between cultural values and people management practices? What are the shortcomings of this approach in understanding people management practices in different countries?...

3 What measures can a management team take to successfully set up operations in another country, where the local culture is different from their own?

2 What are the main causes of cultural clashes between managers from Sweden and employees in Spain? What can be done to lessen the negative aspects and to strengthen the synergies between the two...