First National Bank Recently Made a Five-Year $100 Million Fixed-Rate

question 33

Multiple Choice

First National Bank recently made a five-year $100 million fixed-rate loan at 10 percent. Annual interest payments are $10 million, and all principal will be repaid in year 5. The bank wants to swap the fixed interest payment into floating-rate payments. If the bank could borrow at a fixed rate of 8 percent for five years, what is the notional principal of the swap?

• A)$80 million
• B)$100 million
• C)$125 million
• D)$180 million

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Definitions:

Induced Labor

A medical procedure used to stimulate uterine contractions before natural labor begins, for various health reasons concerning the mother or baby.

Braxton-Hicks Contraction

Irregular, often painless contractions that occur during pregnancy as the uterus prepares for childbirth; sometimes referred to as "false labor."

Oxytocin

A hormone and neurotransmitter that plays a role in social bonding, reproduction, childbirth, and the period after childbirth.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, which carry genetic information.