An Investor Enters into a 2-Year Swap Agreement to Purchase

question 18

Multiple Choice

An investor enters into a 2-year swap agreement to purchase crude oil at $43.26 per barrel. Soon after the swap is created forward prices rise and the new swap price on a similar swap is $44.12. If interest rates are 5.0% per year, what is the gain to be made from unwrapping the original swap agreement?

• A) $0.86
• B) $1.60
• C) $1.64
• D) $1.72

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Definitions:

Herbal Remedies

Medicinal products made from plants, herbs, or botanical sources used for their therapeutic or healing properties.

Regulated

Controlled or governed according to rules, standards, or laws to ensure proper operation or behavior.

Kava

A beverage made from the roots of the kava plant, traditionally consumed in the Pacific Islands, known for its sedative and anxiolytic effects.

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An agent or approach that has a calming effect, reducing excitement or anxiety.