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Two years ago, Rone issued a $25 million (U.S.$), five-year floating rate note (FRN). The FRN pays an annual coupon equal to one-year LIBOR plus 75 basis points. The FRN is non-callable and will be re
A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed rate of 9.75 percent annually on a notional amount of €15,000,000 and rec
Determine the QSD and set up a floating-for-floating rate swap where the swap bank receives .125 percent and the two counterparties share the remaining savings equally.
Assume a currency swap in which two counterparties of comparable credit risk each borrow at the best rate available, yet the nominal rate of one counterparty is higher than the other
A U.S. company needs to raise €50,000,000. It plans to raise this money by issuing dollar denominated bonds and using a currency swap to convert the dollars to euros. The company expects interest
Suppose Morgan Guaranty, Ltd. is quoting swap rates as follows: 7.75 - 8.10 percent annually against six-month dollar LIBOR for dollars and 11.25 - 11.65 percent annually against six-month dollar
If the cost advantage of interest rate swaps would likely be arbitraged away in competitive markets, what other explanations exist to explain the rapid development of the interest rate swap market?
Explain “free cash flows.” Why do managers like to retain free cash flows instead of distributing it to shareholders? Discuss what mechanisms may be used to solve this problem?
Concept raised in the Dasgupta article in the terms of theoretical microeconomics. Do not try to solve the problem. Simply try to structure the optimization decision.
Many companies grant stocks or stock options to the managers. Discuss the benefits and possible costs of using this kind of incentive compensation scheme.
The Cadbury Code of the Best Practice adopted in the United Kingdom led to a successful reform of corporate governance in the country. Explain the key requirements of the Code and discuss how it may h
Studies show that the legal protection of shareholder rights varies a great deal acro+A66ss countries. Discuss the possible reasons why the English common law tradition provides the strongest and the
Following corporate scandals and failures in the U.S. and abroad, there is a growing demand for corporate governance reform. What should be the key objectives of corporate governance reform? What kind
The public corporation is owned by multitude of shareholders but managed by professional managers. Managers can take self-interested actions at the expense of shareholders. Discuss the conditions unde
The majority of major corporations are franchised as public corporations. Discuss the key strength and weakness of the ‘public corporation’. When do you think the public corporation as an
A U.S. computer programmer is hired by a British company for consulting and gets paid from the U.S. bank account maintained by the British company.
Since the early 1980s, foreign portfolio investors have purchased a significant portion of U.S. treasury bond issues. Discuss the short-term and long-term effects of foreigners’ portfolio invest
Comment on the following statement: “Since the U.S. imports more than it exports, it is necessary for the U.S. to import capital from foreign countries to finance its current account deficits.&r
In contrast to the U.S., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?
The United States has experienced continuous current account deficits since the early 1980s. What do you think are the main causes for the deficits? What would be the consequences of continuous U.S. c
Assess the possibility for the euro to become another global currency rivaling the U.S. dollar. If the euro really becomes a global currency, what impact will it have on the U.S. dollar and the world
In an integrated world financial market, a financial crisis in a country can be quickly transmitted to other countries, causing a global crisis. What kind of measures would you propose to prevent the
Rebut the above criticism from the viewpoint of the proponents of the flexible exchange rate regime.
Suppose that the pound is pegged to gold at 6 pounds per ounce, whereas the franc is pegged to gold at 12 francs per ounce. This, of course, implies that the equilibrium exchange rate should be two fr
In the City of Joplin, due to weather devastation and hurricane effects, the cost of parking in the local Square has increased by 20%. This change