Company X Wants to Borrow $10,000,000 Floating for 5 Years;A Swap Bank Proposes the Following Interest Only Swap: X

The Answer of Company X Wants to Borrow $10,000,000 Floating for 5 Years;A Swap Bank Proposes the Following Interest Only Swap: X

Company X Wants to Borrow $10,000,000 Floating for 5 Years;A Swap Bank Proposes the Following Interest Only Swap: X

The Answer of Company X Wants to Borrow $10,000,000 Floating for 5 Years;A Swap Bank Proposes the Following Interest Only Swap: X

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Company X Wants to Borrow $10,000,000 Floating for 5 Years;

question 18

Multiple Choice

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 here: $\begin{array} { c c c } & \text { Fixed-Rate } & \text { Floating-Rate } \\&\text { Borrowing Cost } & \text { Bortowing Cost } \\\text { Compary X } & 10 \% & \text { LIBOR } \\\text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \%\end{array}$ 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; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 10.05 percent.Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR ? 0.15 percent. $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 here: \begin{array} { c c c } & \text { Fixed-Rate } & \text { Floating-Rate } \\ &\text { Borrowing Cost } & \text { Bortowing Cost } \\ \text { Compary X } & 10 \% & \text { LIBOR } \\ \text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \% \end{array} 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; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 10.05 percent.Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR ? 0.15 percent. What is the value of this swap to the swap bank? A) The swap bank will earn 40 basis points per year on $10,000,000 = $40,000 per year. B) The swap bank will earn 10 basis points per year on $10,000,000 = $10,000 per year. C) The swap bank will lose money. D) none of the options$ What is the value of this swap to the swap bank?

Understand the concepts of directional (one-tailed) and nondirectional (two-tailed) tests in correlation.

Recognize the limitations of correlation in inferring causality.

Understand the concept of interaction effects in ANOVA.

Identify the visual representation of interaction and main effects on graphs.

Definitions:

Direct Labor

The wages and other forms of remuneration paid to employees who directly work on the products being manufactured, such as assembly line workers.

Property, Plant, and Equipment

Long-term tangible assets used in the operation of a business, such as buildings, machinery, and equipment.

Raw Material

Basic materials used in the production process, which are transformed into finished goods through the manufacturing process.

Fixed Overhead

Expenses that do not vary with production volume, including rent, salaries, and insurance.