Question
Suppose that Tesla has arranged to borrow $100 million at 3.2% fixed interest rate and wishes to switch to a floating rate linked to LIBOR.
Suppose that Tesla has arranged to borrow $100 million at 3.2% fixed interest rate and wishes to switch to a floating rate linked to LIBOR. Tesla contacts Citigroup and enters into the swap where Citigroup agrees to pay Tesla a fixed interest rate of 2.97% on a notional principal of $100 million and in return Tesla agrees to pay to Citigroup LIBOR rate on the same notional principal.
a. Show the interest payments on Tesla borrowings, net cash flow from swap, and total payments.
b. What interest rate will Tesla pay on that floating rate loan?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To analyze this situation and answer the questions lets proceed step by step Step 1 Analyze the initial borrowing Teslas initial borrowing 100 million ...
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Step: 2
Step: 3
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The Handbook Of Credit Portfolio Management
Authors: Greg Gregoriou, Christian Hoppe
1st Edition
0071598340, 978-0071598347
