Question: The QM entity can borrow 15% at fixed interest. LIBOR + 1.75 can be borrowed with variable interest. The CY entity can borrow 12% with

The QM entity can borrow 15% at fixed interest. LIBOR + 1.75 can be borrowed with variable interest.

The CY entity can borrow 12% with fixed interest rate and LIBOR + 0.5 with variable interest rate.

The QM entity signed an agreement with a bank to borrow fixed interest. The bank will pay LIBOR to the QM business, and the QM business will pay the bank 12.25% interest.

The CY company will pay LIBOR to the intermediary bank, and 12% to the CY enterprise at the bank.

a. Find the total borrowing costs of the QM and CY business after the swap .

b. Calculate the total earnings earned by the A and B entity due to swaps .

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!

Consider the following information: Rate of Return if State Occurs State of Economy Boom :57 Bust of Economy .66 .34 Probability of State Stock A .09 .13 Stock B Stock C .03 .19 .24 -.04 a. What is...

1 What are the main components of personal financial planning? Solve What is the purpose of a financial plan? Solve Identify some common actions taken to achieve financial goals. How does a job...

Question: What as the average weekly safety inventory level of refined sugar from the beginning January 2022 to the end of July 2022? A. 512,465.9691 metric tons per week B. 316,002.1474 metric tons...

X business able to borrow 15% with fixed interest. With varible interest it able borrow LIBOR+1,75. Y business able to borrow 12% with fixed interest. With varible interest it able borrow LIBOR+0,5....

Can you please help with the following ive been in the hospital and have gotten behind Brief Exercise 116 On April 1, 2018, West Company purchased $422,000 of 6.75% bonds for $438,630 plus accrued...

Problem 2 (4 points): Consider two firms AAA and BBB. Each firm needs to borrow $1M. AAA wants to borrow at a fixed interest rate while BBB wants to borrow at a floating interest rate. AAA can borrow...

Q7. Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year....

Hello i have been trying to solve these issues, can you please support me? Thank you in advance lenovo Projected Balance Sheet Consumer 10 ting at 375 Corporate loans 14. Heating rate in rate 16 825...

Q2. Interest Rate Swap Companies A and B both plan to borrow $15 million for 5-years. The companies face different borrowing costs. Company A can borrow for a fixed rate of 9% per annum or a floating...

Refer to the projected balance sheet of a bank shown below (numbers are in millions): Projected Balance Sheet Assets Liabilities Consumer loans -10% floating rate 375 Demand deposits - 2% floating...

Peabody Coal acquired the mineral rights to a tract of land containing coal deposits. Total costs of acquisition, exploration, development were $1,200,000 and an ARO of $300,000 was recorded. The...

A wire 0.15 m long carrying a current of 2.5 A is perpendicular to a magnetic field. If the force exerted on the wire is 0.060 N, what is the magnitude of the magnetic field?

Dr . Salor has decided to update his office while ordering medical supplies. Dr . Salor bought new furniture for $ 2 3 0 0 and computers for $ 1 6 0 0 . He paid with cash for each item. Dr . Salor...

Century-Fox Corporation's employees are eligible for postretirement health care benefits after both being employed at the end of the year in which age 60 is attained and having worked 20 years. Jason...

Southern Atlantic Distributors began operations in January 2018 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful...

Heather McIntosh of Watertown, South Dakota, recently purchased a home for $190,000. She put $25,000 down and took out a 25-year loan at 5.5 percent interest. (a) Use Table 9-4 on page 285 to...

Round Tree Manor is a hotel that provides two types of rooms with three rental classes: Super Saver, Deluxe, and Business. The profit per night for each type of room and rental class is as follows:...

Kevin Tutumbo of Terre Haute, Indiana, has owned his home for 15 years and expects to live in it for a least five more. He originally borrowed $135,000 at 6 percent interest for 30 years to buy the...

Design a minimum-mass symmetric three-bar truss (the area of member 1 and that of member 3 are the same) to support a load P, as was shown in Fig. 2.9. The following notation may be used: Pu = P cos...

8. 9/11 A study of about n51000 individuals in the United States during September 2122, 2001, revealed that 43% of the respondents indicated that they were less willing to fly following the events of...

12. Wiring Packages, continued Refer to Exercise 11. Suppose the company employs 10 assemblers of wiring packages. a. Find the mean and standard deviation of the companys daily (8-hour day)...

7. Sprouting Radishes A biology experiment was designed to determine whether sprouting radish seeds inhibit the germination of lettuce seeds.22 Three 10-centimeter Petri dishes were used. The first...