A Bank entered into a 5,000,000, 1 year equity swap with quarterly payments 300 days ago. The bank agreed to pay an annual fixed rate of 4% and receive the returns on an international equity index. The index was trading at 3,000 at the end of the third quarter, 30 days ago. The current 60 day LIBOR rate is 3.6%, the discount factor is 0.9940 and the index is now at 3150. The value of the swap to the bank is: a) -257,795 b) $-114 676 C) $155 401 D) $230,300
Which of the following companies appears to have the lowest relative valuation according to the leading PEG ratio? Company A 1.7 Company B 1.1 Company C 1.9 Company D 1.0
prob_13 Wrote: ------------------------------------------------------- > A Bank entered into a 5,000,000, 1 year equity \> swap with quarterly payments 300 days ago. The \> bank agreed to pay an annual fixed rate of 4% and \> receive the returns on an international equity \> index. The index was trading at 3,000 at the end \> of the third quarter, 30 days ago. The current 60 \> day LIBOR rate is 3.6%, the discount factor is \> 0.9940 and the index is now at 3150. The value of \> the swap to the bank is: \> \> a) -257,795 > b) $-114 676 > C) $155 401 > D) $230,300 D.
D is correct, but what was your logic to that answer?
D for the swap question
I thought we were swapping questions. what? what I thought we were in the trust tree in the nest, were we not?
Sponge_Bob_CFA Wrote: ------------------------------------------------------- > Which of the following companies appears to have > the lowest relative valuation according to the > leading PEG ratio? > > Company A 1.7 > Company B 1.1 > Company C 1.9 > Company D 1.0 Interesting rebuttal to the swap question Sponge_Bob. I can’t remember this for sure, but I think Company D would be undervalued.
ah I see…sponge bob was answering the same question in his own unique style.impressive
Sponge_Bob_CFA Wrote: ------------------------------------------------------- > I thought we were swapping questions. what? what > I thought we were in the trust tree in the nest, > were we not? LOL. I finally got it.
Sponge_Bob_CFA Wrote: ------------------------------------------------------- > Which of the following companies appears to have > the lowest relative valuation according to the > leading PEG ratio? > > Company A 1.7 > Company B 1.1 > Company C 1.9 > Company D 1.0 I would go with C
mwvt9 Wrote: ------------------------------------------------------- > Sponge_Bob_CFA Wrote: > -------------------------------------------------- > ----- > > I thought we were swapping questions. what? > what > > I thought we were in the trust tree in the > nest, > > were we not? > > LOL. I finally got it. I got it now as well… “SWAP Question” very nice…
prob_13 Wrote: ------------------------------------------------------- > D is correct, but what was your logic to that > answer? On the fixed side you are going to receive 5,000,000 plus the last payment of 50,000 (5,000,000*.04/4) in 60 days. You have to discount this back to the PV by using the discount factor given which can be calc by 1/1+((.036)*(60/360))=.9940 PV for fixed side is 5,050,000*.9940=5,019,700 PV for equity side is easier 5,000,000*(3150/3000)=5,250,000. There is no need to discount anything because it is already a present value. Value to the bank is what they REC minus what they PAY $5,250,000-$5,019,700=$230,300
Ok, enough shenanigans, off to study.
What was the PEG answer Sponge?
No idea, I hijacked it from a thread a few pages back.
5m 5*0.04/4 = 0.05m 5 + 0.05m = 5.05m 1/[1 + 0.036/6] = 0.9940 5.05*0.9940 = 5.0197 Equity Side (3150/3000)*5m = 5.25m 5.25 - 5.0197 = 0.2303m = D?
Sponge_Bob_CFA Wrote: ------------------------------------------------------- > No idea, I hijacked it from a thread a few pages > back. Great! I like you post even better now.
Sponge_Bob_CFA Wrote: ------------------------------------------------------- > No idea, I hijacked it from a thread a few pages > back. gee. and here i was thinking that sponge_bob wanted to say ‘D’ by posting a question with answer D in response to the swap question.
I agree with D. Lowest price per unit growth.
prob_13 Wrote: ------------------------------------------------------- > Sponge_Bob_CFA Wrote: > -------------------------------------------------- > ----- > > Which of the following companies appears to > have > > the lowest relative valuation according to the > > leading PEG ratio? > > > > Company A 1.7 > > Company B 1.1 > > Company C 1.9 > > Company D 1.0 > > > I would go with C Is the answer to this D??? I think it should be the lowest P/E per unit of Growth that should be the most undervalued, no?