solution for chapter 10

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1、Chapter10InterestrateandcurrencyswapP3451.Solution:a.TheQSD=(12.0%-10.5%)-(LIBOR+1%-LIBOR)=0.5%.b.Alphaneedstoissuefixed-ratedebtat10.5%andBetaneedstoissuefloatingrate-debtatLIBOR+1%.AlphaneedstopayLIBORtoBeta.Betaneedstopay10.75%toAlpha.Ifthisisdone,Alpha’sfloating-rateall-

2、in-costis:10.5%+LIBOR-10.75%=LIBOR-0.25%,a0.25%savingsoverissuingfloating-ratedebtonitsown.Beta’sfixed-rateall-in-costis:LIBOR+1%+10.75%-LIBOR=11.75%,a0.25%savingsoverissuingfixed-ratedebt.LIBORAlphaBeta10.75%IssuefixrateatIssuefloating10.5%rateLIBOR+1%P3452.Solution:Alphawill

3、issuefixed-ratedebtat10.5%andBetawillissuefloatingrate-debtatLIBOR+1%.Alphawillreceive10.7%fromtheswapbankandpayitLIBOR.Betawillpay10.8%totheswapbankandreceivefromitLIBOR.Ifthisisdone,Alpha’sfloating-rateall-in-costis:10.5%+LIBOR-10.7%=LIBOR-.20%,a0.20%savingsoverissuingfloatin

4、g-ratedebtonitsown.Beta’sfixed-rateall-in-costis:LIBOR+1%+10.8%-LIBOR=11.8%,a0.20%savingsoverissuingfixed-ratedebt.LLAlphaSwapBetabank10.7%10.8%Issuefixrateat10.5%IssuefloatingrateLIBOR+1%P3453.Solution:Thequalityspreaddifferentialis[(LIBOR6+1.0percent)-(LIBOR6+0.125%)=]0.875%-

5、[(LIBOR3+.625%)-(LIBOR3+0.125%)=]0.50%,whichequals0.375%.Iftheswapbankreceives0.125%,eachcounterpartyistosave0.125%.Toeffecttheswap,CompanyAwouldissueFRNsindexedtosix-monthLIBORandCompanyBwouldissueFRNsindexedthree-monthLIBOR.CompanyBmightmakesemi-annualpaymentsofsix-monthLIBO

6、R+.125percenttotheswapbank,whichwouldpassallofitthroughtoCompanyA.LIBOR3+LIBOR30.625%CompanyASwapCompanyBLIBOR6+bankLIBOR6+0.125%0.875%11%LIBOR6+0.125%LIBOR3+0.625%P3466.a.TheinstrumentsneededbyScottareafixed-couponbondandafloatingratenote(FRN).Thetransactionsrequiredareto:is

7、sueafixed-couponbondwithamaturityofthreeyearsandanotionalamountof$25million,andbuya$25millionFRNofthesamematuritythatpaysone-yearLIBORplus75bps.P3467.a.Euronotionalprinciple=384,615.385Euronotionalprinciple=£256,410,257b.12,500.000£9,615,385