XYZ Corporation Enters into a 6-Year Interest Rate Swap with a Swap

question 94

Multiple Choice

XYZ Corporation enters into a 6-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed-rate of 9 percent annually on a notional amount of SFr10,000,000 and receive LIBOR - ½ percent. As of the third reset date (i.e. mid-way through the 6 year agreement) , calculate the price of the swap, assuming that the fixed-rate at which XYZ can borrow has increased to 10%.

• A)SFr248,685
• B)SFr900,000
• C)SFr2,700,000
• D)SFr7,300,000

---

Definitions:

Tariff

A tariff is a tax imposed by a government on imported or exported goods, often used to protect domestic industries or generate revenue.

Import-Competing Clauses

Provisions that protect domestic industries by limiting or imposing conditions on the import of similar foreign goods.

Import Reduction Acts

Legislation designed to decrease the importation of goods into a country to protect domestic industries.

Trade Protection

Policies that limit imports.