Exhibit 23.7 Use the Information Below for the Following Problem(S)

question 10

Multiple Choice

Exhibit 23.7
Use the Information Below for the Following Problem(S)
The WallMal Company has entered into a 4-year interest rate swap, with semiannual settlement, to pay a fixed rate of 8% per year and receive 6-month LIBOR. The notional principal is $50,000,000.
-Refer to Exhibit 23.7.Assume that one year later the fixed rate on a new 3-year receive fixed pay floating LIBOR swap has fallen to 7% per year.Settlement is on a semiannual basis.Calculate the market value of the FRN based on $100 face value.

• A) $102.66
• B) $100.00
• C) $95.56
• D) $89.63
• E) $70.77

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Definitions:

Perfectly Competitive

A market structure where there are many buyers and sellers, all selling identical products, with no barriers to entry or exit.

Market Price

The current exchange rate for an asset or service on the market.

Total Revenue

The total amount of money a firm receives from sales of its products or services.

Perfectly Competitive

A market structure characterized by a large number of small firms, homogeneous products, free entry and exit, and perfect information, leading to an efficient allocation of resources.