You Enter into a $100 Million Notional Swap to Pay

question 4

Multiple Choice

You enter into a $100 million notional swap to pay six-month Libor and receive 8%. Payment dates are semi-annual on both legs. The last payment date was March 25 and the next payment date is September 25. Floating payments are based on the USD money-market convention, and fixed payments are based on the 30/360 convention. If the net payment you will receive on September 25 is zero, what must have been the Libor reset on march 25?

• A) 6%.
• B) Higher than 6%.
• C) Lower than 6%.
• D) Cannot be calculated from the given information.

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Definitions:

Medulla Oblongata

A section at the lower part of the brainstem controlling vital life functions such as breathing and heart rate.

Auditory Information

Data or knowledge received and processed through the sense of hearing.

Pons

A structure in the hindbrain that acts as a neural relay center, facilitating the crossover of information between the left side of the body and the right side of the brain and vice versa. It is also involved in balance and in the processing of both visual and auditory information.

Pituitary Gland

A small endocrine gland located at the base of the brain that produces hormones regulating growth, metabolism, and reproductive functions.