14. Sysco must have felt that the combination of fixed plus swap would result in an overall better rate. In
other words, variable rate available via a swap may have been more attractive than the rate available
from issuing a floating-rate bond.
Solutions to Questions and Problems
NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps.
Due to space and readability constraints, when these intermediate steps are included in this solutions
manual, rounding may appear to have occurred. However, the final answer for each problem is found
without rounding during any step in the problem.
1. The initial price is $3,122 per metric ton and each contract is for 10 metric tons, so the initial contract
Initial contract value = ($3,122 per ton)(10 tons per contract) = $31,220
And the final contract value is:
2. The price quote is $16.607 per ounce and each contract is for 5,000 ounces, so the initial contract value
Initial contract value = ($16.607 per oz.)(5,000 oz. per contract) = $83,035
At a final price of $16.81 per ounce, the value of the position is:
Final contract value = ($16.81 per oz.)(5,000 oz. per contract) = $84,050
Since this is a short position, there is a net loss of:
$84,050 – 83,035 = $1,015 per contract