Suppose a Bank Charges

question 15

Multiple Choice

Suppose a bank charges .8% to arrange the swap and Axil and Bevel split the resulting cost savings.Then Axil will pay ___ for its floating-rate money and Bevel will pay ___ for its fixed-rate money.

• A)LIBOR- .7%;7.5%
• B)LIBOR + .4%;7.15%
• C)LIBOR;7.45%
• D)LIBOR + .5%;6.75%

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Definitions:

Restricted

Limited in extent, number, scope, or action.

Endowment Principal

The core capital in an endowment, which is invested to generate income while preserving the original amount.

Payout

The process of distributing funds by foundations and trusts to meet legal requirements or fulfill their mission.

Accrual Basis

An accounting method where revenue and expenses are recorded when earned or incurred, regardless of when cash transactions occur.