Consider a Five-Year Floating Rate Loan with Principal of $10

question 7

Multiple Choice

Consider a five-year floating rate loan with principal of $10 million and quarterly payments based on the three-month bbalibor rate.Suppose the bbalibor rates are 0.01 for the first three years and 0.02 for the last two years.What is the value of the floating rate loan when it is issued?

• A) $9.27 million
• B) $9.85 million
• C) $9.90 million
• D) $10 million
• E) $10.55 million

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Definitions:

Agranulocytes

White blood cells, such as lymphocytes and monocytes, that lack granules in their cytoplasm and play a role in the immune system.

Platelets

Small blood cells essential for blood clotting, preventing excessive bleeding when blood vessels are injured.

Red Bone Marrow

A type of bone marrow that produces red blood cells, white blood cells, and platelets.

Histamine

A compound involved in local immune responses, regulating physiological function in the gut and acting as a neurotransmitter.