A One Year Interest Rate Swap with Quarterly Settlements Is

question 10

Essay

A one year interest rate swap with quarterly settlements is agreed at a swap rate of 7.5% p.a.on a notional principal of $1 million.Given the BBSW at the start of each quarter is 8%, 9.5%, 7% and 7.5% respectively throughout the year, calculate the swap cash settlements and indicate whether the settlement is payable by the fixed-rate or floating-rate payer in the swap.(Use d/diy = 0.25)

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Definitions:

Id

A concept in psychoanalytic theory representing the instinctual drives and primal impulses.

Defense Mechanism

Psychological strategies brought into play by the unconscious mind to manipulate, deny, or distort reality in order to defend against feelings of anxiety and unacceptable impulses.

Denial

A defense mechanism in which confrontation with a personal problem or with reality is avoided by denying the existence of the problem or reality.

Thematic Apperception Test (TAT)

A projective test consisting of drawings of ambiguous human situations, which the test taker describes; thought to reveal inner feelings, conflicts, and motives, which are projected onto the test materials.