1. A swap bank makes the following quotes for 5-year swaps and AAA-rated firms:?,USD,Bid – 5%,Ask – 5.2%,EURO,Bid – 7%,Ask- 7.2%,,A.The bank stands ready to pay $5.2% against receiving dollar LIBOR on 5-year loans.,?B. The bank stands ready to receive €7% against receiving dollar LIBOR on 5-year loans.,?C. The bank stands ready to receive €7% against receiving dollar LIBOR on 5-year loans.?,D. None of the above,,2. Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown below:,COMPANY X ,Fixed- Rate Borrowing Cost – 10%,Floating -Rate Borrowing Cost – LIBOR,COMPANY Y ,Fixed- Rate Borrowing Cost – 12%,Floating -Rate Borrowing Cost – LIBOR + 1.5%, ,A swap bank proposes the following interest only swap: X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR – 0.15%; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 9.90%. ??What is the value of this swap to company X? ??A. Company X will lose money on the deal.,?B. Company X will save 5 basis points per year on $10,000,000 = $25,000 per year.?,C. Company X will only break even on the deal?,D. Company X will save 25 basis points per year on $10,000,000 = $5,000 per year,?E. None of the above,
Regent Papers is a library of common essays on high school, college, undergraduate and postgraduate topics. We have collected top papers from various institution, students and professors. The papers are based on common essay topics in all subjects.