Find the All-In-Cost of a Swap to a Party That

question 73

Multiple Choice

Find the all-in-cost of a swap to a party that has agreed to borrow $5 million at 5 percent externally and pays LIBOR + ½ percent on a notational principal of $5 million in exchange for fixed rate payments of 6 percent.

• A)LIBOR + ½ percent
• B)LIBOR
• C)LIBOR - ½ percent
• D)None of the above

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Definitions:

Public Saving

The difference between the government's tax revenues and its spending, excluding debt interest.

Tax Revenue

The income that is gained by governments through taxation.

Government Spending

Expenditures by the government sector on goods and services, including infrastructure, education, defense, and healthcare, impacting an economy's aggregate demand.

Budget Deficit

A situation where a government's expenditures exceed its revenues within a specific fiscal period, leading to borrowing or debt accumulation.