Suppose the Quote for a Five-Year Swap with Semiannual Payments

question 37

Multiple Choice

Suppose the quote for a five-year swap with semiannual payments is 8.50-8.60 percent in dollars and 6.60-6.80 percent in euro against six-month dollar LIBOR. The means

• A)the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate dollar payments of 8.50 percent against receiving semiannual fixed-rate euro payments of 6.80.
• B)the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate euro payments of 6.60 percent against receiving semiannual fixed-rate dollar payments of 8.60.
• C)both a and b
• D)none of the above

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Definitions:

Cash Sales Policy

A company's practice of selling products or services for cash, rather than extending credit to customers.

Rate of Default

The probability that a borrower will be unable to make required payments on their debt obligation.

Credit Period

The duration during which a buyer can purchase goods or services on credit before payment is due to the seller, often expressed in days.

Percentage Cost

The cost expressed as a percentage of the purchase price or other value, often used to analyze and compare costs or expenses.