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Question 5 please! 5. An A-rated company knows it will need to borrow $1M in 4 years, and repay the entire $1M in 5 years.
Question 5 please! 5. An A-rated company knows it will need to borrow $1M in 4 years, and repay the entire $1M in 5 years. It wishes to lock an interest rate on this loan now, because its CFO is afraid interest rates will increase in the future. The CFO found a bank willing to give the company $1M in 4 years and receive $1M in 5 years, if the company pays the bank $X now. Assume again that the credit spread for bonds rated A is currently constant at 1% for all terms. What is the no-arbitrage value of X? o Home L Clipboard AutoSave OFF BESVU - Book3 Q OY Insert Draw Page Layout Share Comments Share A % e cohereunal Formatting v Format as Table Number Cell Styles X fx B C D E F G Font Alignment ci A 1 Risk-free rates 2 1Y 3 24 4 3Y 5 5Y 0.18% 0.30% 0.43% 0.87% 1.39% 1.98% 2.73% 3.08% RSITY INIA 6 7Y TOMMERCE bext
Question 5 please!
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