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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Definitions:

Central Intelligence Agency (CIA)

A civilian foreign intelligence service of the federal government of the United States, tasked with gathering, processing, and analyzing national security information.

Federal Bureau of Investigation (FBI)

A principal federal law enforcement agency of the United States, dedicated to safeguarding national security and combating major criminal threats.

Independent Agencies

Agencies of the United States government that operate independently of the federal executive departments, though they are still subject to presidential control.

Richard Nixon

The 37th President of the United States (1969-1974), known for his foreign policy achievements and the Watergate scandal, which led to his resignation.