UNIVERSITY OF CONNECTICUT SCHOOL OF BUSINESS FNCE 4305 Global Financial Management 001 Dr.

Michel Rakotomavo

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Assignment 3 (due before the class session of Thursday, April 25, 2013) Note: Only details and steps will receive credit. 1.Choose a publicly-traded multinational corporation. a. Estimate the % premium it pays above comparable US government bond rates. Possible sources for corporate interest rates include the Notes to Consolidated Statements in the 10-K report and the Bloomberg terminal in BUSN 408. Add this premium to all interest rates below. b.Assume the firm intends to raise $50 million at a fixed rate now and pay it back in one year. Collect and report current interest rate, LIBOR (Bloomberg keyword: LR), interest-rate swap (IRS) (Bloomberg keyword: IRSB), and Eurodollar futures quotes (Bloomberg keyword: EDS), and answer the following questions: Explain in detail (using diagrams whenever necessary) how each of the following alternatives can help the firm reach its fixed-rate borrowing objective. Compute the locked-in fixed rate in each case. c. Direct fixed-rate borrowing; d.Floating-rate borrowing and some position in the IRS market; e. Floating-rate borrowing and some position in the Eurodollar futures market.