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

question 72

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 risen to 9% per year.Settlement is on a semiannual basis.Calculate the market value of the FRN based on $100 face value.

• A) $97.42
• B) $100.00
• C) $92.56
• D) $99.63
• E) $75.77

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Definitions:

Unfair

An act or circumstance that is unjust, biased, or inequitable, often violating ethical standards or social norms.

Behavioral Economists

Specialists in a field of economics that explores how psychological, social, cognitive, and emotional factors affect the economic decisions of individuals and institutions.

Ultimatum Game

The ultimatum game is a game theory experiment where two players decide how to divide a sum of money; one proposes the division and the other can accept or reject it, where rejection means neither gets anything.

Market Transactions

The buying and selling activities that take place in the marketplace between buyers and sellers.