TDK Industries Approaches a Bank in April to Organise Financing

question 14

Essay

TDK Industries approaches a bank in April to organise financing through a 180-day bank bill facility.The facility will begin in June, using 90-day bank bills with a total face value of $10 million.The company wishes to know what they can do now to hedge against interest rate risk.The June six-month swap rate is 4.5%, and it turns out that the 90-day BBR is 4% in June and 5% in September.Calculate the effective interest rate established for the duration of the bill facility, through the use of a swap contract.

---

Definitions:

Sum-Of-The-Years-Digits

A method of depreciation that accelerates costs based on the premise that an asset is more productive in its earlier years than its later years.

Scrap Value

The estimated residual value of an asset after its useful life has ended.

Camera Unit

A complete devise for capturing photographs or videos, including the body, lens, and potentially other integrated components.

Double-Declining-Balance

Double-declining-balance is an accelerated method of depreciation that doubles the regular depreciation rate, accounting for most of the asset's depreciation in the early years of its life.