1. Chapter 16
Other Derivatives

2. Floating Rate Note

3. Interest Rate Swap Swaps dealer Firm L Firm S Fixed rate loan
9.15%
9.30%
Swaps dealer
Firm L
Firm S
LIBOR %
LIBOR % 9%
[LIBOR %]
Fixed rate loan
Floating rate loan

4. Fixed and Floating Rates for Firms L and S
Firm L Firm S
Fixed Rate 9% 11%
Floating Rate LIBOR % LIBOR %

5. Interest Paid in Swaps
Interest Paid and Received by Firm L in the Swap
Pays Interest on Long-Term Fixed-Rate Bond -9%
Receives Fixed Rate from Swaps Dealer 9.15%
Pays Floating Rate to Swaps Dealer -[LIBOR %]
Net -[LIBOR – 0.05%]
Interest Paid and Received by Firm S in the Swap
Pays Interest on Short-Term Floating-Rate Loan -[LIBOR %]
Pays Fixed Rate to Swaps Dealer -9.30%
Receives Floating Rate from Swaps Dealer +[LIBOR %]
Net %

6. Convertible Bonds $ Time Par Issue date Maturity Convertible price
Stock value
Call price
Par
Straight bond value
Time
Issue date
Maturity