It Is March 15, and the Next Payment Date in an Equity

question 22

Multiple Choice

It is March 15, and the next payment date in an equity swap is September 15. You contract through an equity swap ($100,000 notional) to receive Libor and pay the equity return. Libor payments use the money market convention, i.e., ACT/360. Suppose the equity index goes from 1011 to 1088 over this period. The six-month Libor on March 15 is 3%. What is your net cashflow on September 15?

• A) \(+ 1,533.33\)
• B) \(- 7,616.22\)
• C) \(- 6,082.89\)
• D) \(+ 3,113.33\)

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Definitions:

Sales Increases

A measurement of the rise in a company's sales over a specific period, indicating growth in business operations.

Capital Intensity Ratio

A metric used to determine the amount of assets required to generate a dollar of revenue; higher ratios indicate more assets are needed.

Accounts Payable

Financial obligations or debts owed by a company to its creditors or suppliers for goods and services received.

Net Income

Refers to the total profit of a company after all expenses and taxes have been subtracted from revenue.