Use the Zero-Coupon Bond Prices Given in the Following Table

question 14

Multiple Choice

Use the zero-coupon bond prices given in the following table to answer the questions that follow.
-Consider a newly issued three-year swap receiving floating paying fixed with principal $10 million dollars,paying the one-year swap rate yearly,and receiving the one-year floating spot rate yearly.What is the value of the swap when it is issued?

• A) $300,335
• B) $341,335
• C) - $300,335
• D) - $341,335
• E) $0

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Definitions:

Variable Costing

An accounting method that considers only variable costs as product costs and treats fixed costs as period costs.

Direct Costing

An accounting method that identifies variable costs directly associated with production and excludes fixed costs from product costing.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that charges only variable production costs to units produced and treats fixed manufacturing overhead as a period expense.