+1 862 207 3288 Case Study, Finance and Accounting analysis
Project description
Please turn in a 3 page analysis based on the following guiding questions (Be detailed, but be concise):<br />
1) In general, what is the rationale and strategy for the use of swaps in finance, i.e. why buy a swap?<br />
2) What were the risks involved in the original SCASD swap contract?<br />
a. Is the $5.35M termination cost per 100bp rate decline reasonable?<br />
b. Define “Basis Risk”- Try to define the basis risk that exists between LIBOR and the BMA index.<br />
c. Try to sketch out how you might value an amortizing swap?<br />
3) The Board is now in a pickle. What are the pros and cons of possible strategies/ courses of action that the Board might employ to deal with the situation?<br />
4) So, You are on the Board; You know the parameters of the dilemma that confronts you; and You have analyzed alternative strategies for dealing with the problem. What should You do? What is your recommendation and why?<br />
5) Should local governments be allowed to use derivatives? What is the fiduciary responsibility of officials serving as Municipal Officials?
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