Find the Upcoming Net Payment in a Plain Vanilla Interest

question 18

Multiple Choice

Find the upcoming net payment in a plain vanilla interest rate swap in which the fixed party pays 10 percent and the floating rate for the upcoming payment is 9.5 percent.The notional principal is $20 million and payments are based on the assumption of 180 days in the payment period and 360 days in a year.

• A)fixed payer pays $1,950,000
• B)fixed payer pays $950,000
• C)floating payer pays $1 million
• D)floating payer pays $50,000
• E)fixed payer pays $50,000

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Definitions:

Charles Evans Hughes

An American statesman, lawyer, and Republican politician who served as Chief Justice of the United States and as a presidential candidate in 1916.

Woodrow Wilson

The 28th President of the United States, serving from 1913 to 1921, known for his leadership during World War I and his advocacy for the League of Nations.

Presidential Election

A presidential election is the process by which a country’s electorate selects the President, often through direct or indirect vote.

Lusitania

British passenger liner sunk by a German U-boat, May 7, 1915, creating a diplomatic crisis and public outrage at the loss of 128 Americans (roughly 10 percent of the total aboard); Germany agreed to pay reparations, and the United States waited two more years to enter World War I.