USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 73

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
An international investment firm buys an interest rate swap that pays the difference between LIBOR and 6 percent if LIBOR exceeds 6 percent. Current LIBOR is 5 percent. The amount of the option is $1,500,000, and the settlement is every three months. Assume a 360-day year.
-Refer to Exhibit 15.20. Find the payoff if LIBOR closes at 4.7 percent.

• A) -$45,000
• B) -$11,250
• C) $0
• D) $11,250
• E) $45,000

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