If You Have Three Years Left on a Five-Year Floating

question 15

Multiple Choice

If you have three years left on a five-year floating rate based on bbalibor paid quarterly,and you want to transform it into a fixed rate loan using a swap,which of the following would be an appropriate method?

• A) Enter a five-year receive floating,and pay a fixed swap where the swap rate is paid quarterly.
• B) Enter a five-year receive fixed,and pay a floating swap where the swap rate is paid quarterly.
• C) Enter a three-year receive floating,and pay a fixed swap where the swap rate is paid quarterly.
• D) Enter a three-year receive fixed,and pay a floating swap where the swap rate is paid quarterly.
• E) Enter a four-year receive fixed,and pay a floating swap where the swap rate is paid quarterly.

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Definitions:

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Debt-Equity Ratio

This ratio, a test of financial leverage, divides a company's liabilities by its stockholders' equity.

Total Debt

The sum of all short-term and long-term liabilities held by an entity.

Total Assets

Total assets are the sum of all current and non-current assets owned by a company, reflecting its overall resources available for use in operations or for sale.