Compute the Payments Due in the First Year on a Three-Year

question 79

Multiple Choice

Compute the payments due in the first year on a three-year amortizing swap from company B to company A.Company A and company B both want to borrow £1,000,000 for three years.A wants to borrow floating and B wants to borrow fixed.A and B agree to split the QSD.

$$\begin{array} { c c c } & \text { Fixed-Rate Borrowirg } & \text {Floatirig-Rate Bort owirig } \\& \text { Cost } & \text { Cost } \\\text { Compary A } &10 \% & LIBOR\\\text { Compary B }& 12 \% & LIBOR+1.5 \%\end{array}$$

• A)B pays £402,114.80 to A
• B)B pays £100,000 to A
• C)B pays £69,788.52 to A
• D)none of the options

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