It Is March 15,and the Next Payment Date in an Equity

question 16

Multiple Choice

It is March 15,and the next payment date in an equity swap is September 15.You contract through an equity swap ($100,000 notional) to receive Libor and pay the equity return.Libor payments use the money market convention,i.e. ,ACT/360.Suppose the equity index goes from 1011 to 1088 over this period.The six-month Libor on March 15 is 3%.What is your net cashflow on September 15?

• A) \(+ 1,533.33\)
• B) \(- 7,616.22\)
• C) \(- 6,082.89\)
• D) \(+ 3,113.33\)

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Definitions:

Inventory

The total amount of goods or materials held in stock by a business, including raw materials, work-in-progress, and finished goods.

Inconsistency

The quality of being irregular, erratic, or not consistent in principles, actions, or outcomes, often leading to unpredictability or conflict.

Load Factor

In the context of utilities, it's a measure of the efficiency of energy usage, calculated as the ratio of average load to the peak load in a given period.

Operating Expense

Costs associated with the day-to-day functions of a business, excluding direct production costs.