Consider a $100 Notional Equity-For-Equity Swap on Two Stocks Where $- \$ 2.00$

question 3

Multiple Choice

Consider a $100 notional equity-for-equity swap on two stocks where the price of the stocks at inception was $40 and $50, respectively. At the present time, sixty-one days after inception, the two stock prices are $39 and $51, respectively. If you pay the return on the first stock and receive the return on the second stock, what is your valuation of the equity swap after sixty-one days? Assume that the Libor interest rate on an ACT/360 basis from now till the next settlement date is 10% for the remaining 122 days.

• A) \(- \$ 2.00\)
• B) Zero
• C) \(+ \$ 4.35\)
• D) \(+ \$ 4.50\)

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Definitions:

Attributions

The process by which people explain the causes of their own and others' behaviors, often categorizing these explanations into internal or external factors.

Emotional Responses

Reactions governed by feelings, such as happiness, anger, or sadness, in response to stimuli or thoughts.

External Factor

An influence originating outside an individual or system that can impact the outcome of processes or behaviors.

Internal Factor

An influence originating from within a person, such as beliefs, desires, and personality traits, affecting their behavior and attitudes.