Consider Bank That Has Entered into a Five-Year Swap on a Notational

question 99

Multiple Choice

Consider bank that has entered into a five-year swap on a notational balance of $10,000,000 with a corporate customer who has agreed to pay a fixed payment of 10 percent in exchange for LIBOR. As of the fourth reset date, determine the price of the swap from the bank's point of view assuming that the fixed-rate side of the swap has increased to 11 percent. LIBOR is at 5 percent.

• A)$909,090.91 gain.
• B)$90,090.09 loss.
• C)No loss or no gain since maturity has not arrived.
• D)$90,090.09 gain.

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Definitions:

Rods

Retinal receptors that detect black, white, and gray, and are sensitive to movement; necessary for peripheral and twilight vision, when cones don’t respond.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and high spatial acuity under bright light conditions.

Myopia

A common vision condition also known as nearsightedness, where distant objects appear blurred while close objects can be seen clearly.

Accommodation

In psychology, the process of adjusting one's schemas and perceptions to incorporate new information.