Suppose the Swap Rate Is 8% and the BBSW Is

question 45

Multiple Choice

Suppose the swap rate is 8% and the BBSW is 11% for the first quarter.Given that the amount hedged is $50 million, which of the following statements is true about the swap settlement? (Assume d/diy = 0.25)

• A)The fixed rate payer pays the floating rate payer $375 000.
• B)The floating rate payer pays the fixed rate payer $375 000.
• C)The fixed rate payer pays the floating rate payer $4 million.
• D)The floating rate payer pays the fixed rate payer $4 million.
• E)The obligations of each party are zero in this quarter.

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Definitions:

Eardrum

A thin membrane that separates the outer ear from the middle ear and vibrates in response to sound waves, facilitating hearing.

Cochlea

The cochlea is a spiral-shaped, fluid-filled inner ear structure responsible for converting sound waves into nerve impulses that are interpreted by the brain as sound.

Ossicles

The three tiny bones in the middle ear known as the malleus, incus, and stapes, crucial for the transmission of sound vibrations to the inner ear.

Müller-Lyer Illusion

A visual illusion where lines of the same length appear to be different lengths due to arrow-like tails.