14-92 Assume That Instead of Investing in Euro Bonds at a Fixed

question 70

Multiple Choice

14-92 Assume that instead of investing in Euro bonds at a fixed rate of 6.5 percent,it invests them in variable rates of LIBOR + 1.5 percent,reset every six months.The current LIBOR rate is 5 percent.What is the spread earned by the bank if LIBOR at the end of six months is 5.5 percent? Assume both interest and principal will be reinvested in six months.Assume the exchange rate remains at €1.75/$ at the end of the year.

• A)0.50 percent.
• B)0.68 percent.
• C)0.86 percent.
• D)0.90 percent.
• E)0.95 percent.

---

Definitions:

Spreadsheet

A digital tool allowing users to organize, analyze, and store data in tabular form, often used for financial calculation and management.

Job-Order Costing

An accounting method used to track the costs associated with producing specific jobs or batches, assigning material, labor, and overhead costs to each job separately.

Cost of Goods Sold

The direct costs attributed to the production of the goods sold by a company, including direct labor and materials, but excluding indirect expenses.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.