1. Firm A is paying $300,000 in fixed interest payments a year while Firm B is paying LIBOR plus 30 basis points on $5 million loans. The current LIBOR rate is 5.5 percent. Firm A and B have agreed to swap interest payments. What is the net payment between these firms this year?
2. The futures contracts on silver are quoted in dollars per troy ounce with a contract size of 5,000 troy ounces. Contract quotes for the day included an open value of 16.650, a high of 16.660, a low of 16.620, and a settle of 16.645. If you purchased three contracts at the closing price what was the dollar cost of your purchase ignoring all transaction costs?
3. Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5% and can issue fixed-rate debt at 9.4%. Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A. What are the resulting net payments of A and B?