D company is a floating rate borrower of $10Million but would prefer to pay a fixed...
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D company is a floating rate borrower of $10Million but would prefer to pay a fixed interest rate. Z company has issued $10Million bonds and pays interest at a fixed rate but would prefer to pay a floating interest rate. D and Z company enter into a SWAP contract at a swap rate 8%. Interest payments are quarterly payments. Use the below table and calculate cash settlements for each party under the given interest rates. Period Interest quarter rate First Second 8% Floating- rate payments 7% 175,000 Third 8.5% Fourth 9% D company Swap Total payments payments 25,000 200,000 Fixed- rate payments 200,000 Z company Swap Total payments payments D company is a floating rate borrower of $10Million but would prefer to pay a fixed interest rate. Z company has issued $10Million bonds and pays interest at a fixed rate but would prefer to pay a floating interest rate. D and Z company enter into a SWAP contract at a swap rate 8%. Interest payments are quarterly payments. Use the below table and calculate cash settlements for each party under the given interest rates. Period Interest quarter rate First Second 8% Floating- rate payments 7% 175,000 Third 8.5% Fourth 9% D company Swap Total payments payments 25,000 200,000 Fixed- rate payments 200,000 Z company Swap Total payments payments
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In a plain vanilla interest rate swap two parties exchange interest payments to alter their exposure ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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