Aldos Hair Salons, Inc needs to borrower $50,000,000 for national expansion Because this is a higher risk company, Aldo would have to pay a floating rate of one year LIBOR plus 450 basis points Since he is risk averse and wants to know his costs, you ask ask a consultant what can be done to get a fixed rate You call Alexandra, old classmate who works in investment banking, and she advises you to get into a fixed float swap She can swap the one year LIBOR for 2 50 fixed One year LIBOR is currently 00 Calculate your annual net payment and effective interest rate Captain Spauldings Imports currently has a $25,000,000 loan at a floating rate of 30 day LIBOR plus 5 50 HE thinks that interest rates are going to go down, but does not want to take a chance on rising rates 30 day LIBOR is currently 3 , so you are paying 8 50 (3 00 LIBOR plus the spread of 5 50 ) Alexandra suggests that the Captain purchase a cap on LIBOR at 4 50 for $225,000 per year If LIBOR goes to 5 , what is the net payment Show the cash flows What is the maximum effective interest rate with the cap Larrys Fine Bank granted a $10,000,000 loan to Bobby Segers Ammo Shop at a floating rate of one year LIBOR plus 4 25 The bank thinks that interest rates are going to go down, but wants to protect its NIM One year LIBOR is currently 4 , so the bank is receiving 8 25 (4 00 LIBOR plus the spread of 4 25 ) The bank can buy a 30 day LIBOR floor of 2 00 for $40,000 per year If LIBOR goes to 1 , what is the net payment Show the cash flows What is the minimum effective interest rate with the floor Question 4 Boeing options are selling as follows May 17 calls with a $385 strike price is $14 65 May 17 puts with a $385 strike price is $19 00 If Boeing stock is currently selling at 381 42 What is the intrinsic value and the time value of the calls Of the puts Are the calls in the money or out of the money The puts

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Aldos Hair Salons, Inc needs to borrower $50,000,000 for national expansion. Because this is a higher risk company, Aldo would have to pay a floating rate of one year LIBOR plus 450 basis points. Since he is risk averse and wants to know his costs, you ask ask a consultant what can be done to get a fixed rate. You call Alexandra, old classmate who works in investment banking, and she advises you to get into a fixed/float swap. She can swap the one year LIBOR for 2.50% fixed. One year LIBOR is currently 00%

Calculate your annual net payment and effective interest rate.

Captain Spauldings Imports currently has a $25,000,000 loan at a floating rate of 30 day LIBOR plus 5.50%. HE thinks that interest rates are going to go down, but does not want to take a chance on rising rates. 30 day LIBOR is currently 3%, so you are paying 8.50% (3.00% LIBOR plus the spread of 5.50%). Alexandra suggests that the Captain purchase a cap on LIBOR at 4.50% for $225,000 per year.

If LIBOR goes to 5%, what is the net payment? Show the cash flows

What is the maximum effective interest rate with the cap?

Larrys Fine Bank granted a $10,000,000 loan to Bobby Segers Ammo Shop at a floating rate of one year LIBOR plus 4.25%. The bank thinks that interest rates are going to go down, but wants to protect its NIM. One year LIBOR is currently 4%, so the bank is receiving 8.25% (4.00% LIBOR plus the spread of 4.25%). The bank can buy a 30 day LIBOR floor of 2.00% for $40,000 per year.

If LIBOR goes to 1%, what is the net payment? Show the cash flows

What is the minimum effective interest rate with the floor?

Question 4: Boeing options are selling as follows:

May 17 calls with a $385 strike price is $14.65

May 17 puts with a $385 strike price is $19.00

If Boeing stock is currently selling at 381.42:

What is the intrinsic value and the time value of the calls? Of the puts?

Are the calls in the money or out of the money? The puts?