A USBank Agrees to a Swap of Making Fixed-Rate Interest Payments

question 80

Multiple Choice

A U.S.bank agrees to a swap of making fixed-rate interest payments of $12 million to a UK bank in exchange for floating-rate payments of LIBOR + 4 percent in British pounds for a notional amount of £100 million.The current exchange rate is $1.50/£.The interest payments will be exchanged at the end of the year at the prevailing rates. At the end of the year, LIBOR is 4 percent and the exchange rate is $1.50/£.What is the net payment paid or received in dollars by the U.S.bank?

• A)The U.S.bank paid $12 million and received $8 million for a net payment of $4 million.
• B)The U.S.bank paid $12 million and received $10 million for a net payment of $2 million.
• C)The U.S.bank paid $12 million and received $12 million for a net receipt of $0 million.
• D)The U.S.bank paid $12 million and received $14 million for a net receipt of $2 million.
• E)The U.S.bank paid $12 million and received $16 million for a net receipt of $4 million.

---

Definitions:

Desirable Behaviour

Actions or reactions of an individual or group that are seen positively by a society or organization, often encouraged to maintain or promote harmony and efficiency.

Positive Reinforcement

The process of encouraging desired behavior by rewarding it, thereby increasing the likelihood of its recurrence.

Work Behaviours

Actions and attitudes that employees exhibit in the workplace, which can affect both their performance and the overall culture of the company.

Inventory of Rewards

A collection or list of potential rewards or incentives that can be offered to individuals or employees to motivate and recognize their contributions.