Japanese investors purchased from Walt Disney Productions projected yen royalties. The 20-year stream of royalties is for Tokyo Disneyland. The present value of that stream of royalties, discounted at 5 percent (the return required by the Japanese investors), was ¥95 billion. Disney took the yen proceeds from the sale, converted them to dollars, and invested the dollars in bonds yielding 8 percent. At the time of the sale, the exchange rate was ¥79.8408 = $1.
What amount (in dollars) did Disney realize from the sale of its yen proceeds?
Describe the similarities and differences between Walt Disney’s transaction and a currency/interest rate swap.
Coca-Cola is considering entering into a currency swap involving $14 million of U.S. debt for an equivalent amount of euro debt. Assuming the swap matures in 10 years, the interest rate on Pfizer’s outstanding 8-year dollar debt is 8% (paid semi-annually), the interest rate on the euro debt is 6 percent (paid semi-annually), and the current spot exchange rate is $1.24/€; structure a swap for Coca-Cola.
IBM wants to swap out of $10,000,000 of fixed interest rate debt and into floating interest rate debt for 3 years. Assume the fixed interest rate is 7.625 percent and the floating rate is dollar LIBOR. What semiannual interest payments will IBM receive and what will IBM pay? (Hint: A table of interest paid and received by IBM and the financial institution will help).
Your answers must be presented in a Word document; if you do any calculations in Excel, copy and paste them from Excel into the Word document. Make sure your responses are clearly marked so your instructor knows which questions your responses are answering. Written comments must be formatted in conformity with CSU-Global Guide to Writing and APA Requirements (Links to an external site.).
For numerical answers, briefly show or explain how you arrived at your solutions to get partial credit if one or more answers are incorrect.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more