Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Same setting ( see below ) , if the swap bank charges 2 0 basis points, and the TX Instruments and the Japanese Company split

Same setting (see below), if the swap bank charges 20 basis points, and the TX Instruments and the Japanese Company split the remaining QSD evenly, how much does TX Instruments save?
As CEO of TX Instruments you are considering financing your Japanese operations with debt. US 10-year treasuries are currently at 4.1% and Japanese 10-year treasuries are at 0.75%. You can borrow at 5.85% domestically (175 bp over the US 10 year treasury) or at 3.0%(225 bp over the Japanese treasury) in Japanese yen. Assume that there exists a Japanese company that can borrow at 100 bp over the Japanese treasury and at 120 bp over the US treasury. What is the Quality Spread Differential (QSD) in basis points for a swap between TX Instruments and the Japanese company?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Bank Analysts Handbook Money Risk And Conjuring Tricks

Authors: Stephen M. Frost

1st Edition

0470091185, 978-0470091180

More Books

Students also viewed these Finance questions