Japanese Airlines (JAL) wants to add one Boeing 787 to its fleet in January 2021. The current purchase price as provided by BA is $100M. JAL has the option to either purchase the aircraft or lease it. JAL is evaluating both the options and needs your help 1. If JAL were to purchase the aircraft, it can borrow up to 70% of the value at Libor + 3%. Please calculate first-year interest payment, assuming Libor is 2% 2. What will be JALs initial cash outlay? 3. Since the borrowing is planned for January 2021, what are some of the instruments, which JAL can use to fix its borrowing rate today? 4. BA is also offering a monthly lease option at a lease rate factor (LRF) of 0.7%, and a tenor of 12 years. Please calculate the monthly lease payments (Lease payments = LRF*Purchase Price) However, since the delivery is in January 2021, there is a risk that interest rates move to where the lease deal is no longer profitable to BA. To protect itself against interest rate risk, BA has added a clause around pegging the LRF to swap rates. BA proposes to adjust monthly lease payments by $100/bp for each basis point change in the current 7-year swap vs. the rate at time of delivery. Currently, the 7-year swap rate is 2% 5. Assume in January 2021, the 7-year swap is 2.5%. What will be the monthly lease payments? 6. Assume in January 2021, the 7-year swap is 1.5%. What will be the monthly lease payments? Obviously, now JAL sees the risk of being tied in a contract where it may have to pay higher lease payments, should the swap rate increase 7. How can JAL hedge this risk? urgent Please solve 5,6,7