A Thrift Has Funded 10 Percent Fixed-Rate Assets with Variable-Rate

question 49

Multiple Choice

A thrift has funded 10 percent fixed-rate assets with variable-rate liabilities at LIBOR + 2 (L + 2) percent.A bank has funded variable-rate assets with fixed-rate liabilities at 6 percent.The bank's variable-rate assets earn LIBOR + 1 (L + 1) percent.The thrift and the bank have reached agreement on an interest-rate swap with the fixed-rate swap payment at 6 percent and the variable-rate swap payment at LIBOR. Assume that the swap is for two years and that LIBOR is 5.25 percent in year one and 6.25 percent in year two.What will be the net swap cash flow each year if the notional value of a swap is $100 million?

• A)The thrift pays $0.75 million to the bank in year one and receives $0.25 million from the bank in year two.
• B)The thrift receives $0.75 million from the bank in year one and pays $0.25 million to the bank in year two.
• C)The thrift pays $0.25 million to the bank in year one and receives $0.75 million from the bank in year two.
• D)The thrift receives $0.25 million from the bank in year one and pays $0.75 million to the bank in year two.
• E)None of the options.

Comprehend the role and implications of bankruptcy law in financial distress situations.

Recognize key statutes related to environmental protection such as CERCLA, RCRA, and TOSCA.

Identify the parties responsible for cleanup under the Superfund statute and their liabilities.

Explain the purpose and effect of an automatic stay in bankruptcy proceedings.

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Definitions:

Middle Childhood

A developmental stage that occurs approximately between the ages of 6 and 12 years, characterized by significant growth in cognitive, emotional, and social abilities.

Effortful Control

The ability to regulate one’s emotions and actions through effort, not simply through natural inclination.

Impulses

Sudden desires or urges that lead to immediate action without conscious thought.

Physical Care

The provision of tangible support and services to ensure the physical well-being of an individual, including health maintenance and daily living needs.