A USBank Agrees to a Swap of Making Fixed-Rate Interest Payments

question 40

Multiple Choice

A U.S.bank agrees to a swap of making fixed-rate interest payments of $12 million to a UK bank in exchange for floating-rate payments of LIBOR + 4 percent in British pounds for a notional amount of £100 million.The current exchange rate is $1.50/£.The interest payments will be exchanged at the end of the year at the prevailing rates.

At the end of year 3,LIBOR rates are 6 percent and the exchange rate is $1.10/£.What is the net payment paid or received in dollars by the U.S.bank?

• A)The U.S.bank paid $12 million and received $16.5 million for a net receipt of $4.5 million.
• B)The U.S.bank paid $12 million and received $11 million for a net payment of $1 million.
• C)The U.S.bank paid $12 million and received $12 million for a net payment of $0 million.
• D)The U.S.bank paid $9 million and received $11 million for a net receipt of $2 million.

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Definitions:

Types of Societies

Categories or groups of societies classified based on their social features, methods of subsistence, or other important characteristics.

Gemeinschaft Society

Gemeinschaft Society refers to traditional societies characterized by close personal relationships, strong family ties, and a sense of community, as opposed to more impersonal and individualistic societies.

Collective Consciousness

A set of shared beliefs, ideas, and moral attitudes which operate as a unifying force within society, originally conceptualized by Émile Durkheim.

Social Solidarity

The sense of unity and mutual support within a society, which binds individuals together and facilitates cooperation and harmonious coexistence.