Assume Two Borrowers,A and B,enter into an Interest Rate Swap

question 5

Multiple Choice

Assume two borrowers,A and B,enter into an interest rate swap agreement and the settlement date is one year after the date of initiation.B exchanges his fixed interest rate with A for a floating rate.The fixed and the floating rate as of the initiation of the agreement is 9%.Which one of the following is true if the interest rate increases to 9.5% at the time of settlement?

• A)A will have to pay money to B on the settlement date
• B)B will have to pay money to A on the settlement date
• C)Both A and B will have to pay on the settlement date
• D)Neither A nor B will have to pay on the settlement date

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Definitions:

Aggression

Behavior intended to harm or intimidate another individual, whether through physical force, verbal assault, or psychological manipulation.

Displacement

A defense mechanism where the mind substitutes either a new aim or a new object for goals felt in their original form to be dangerous or unacceptable.

Adrenal Gland

A gland located above the kidneys that produces hormones such as adrenaline and cortisol, which are critical for the body's stress response.

Corticosteroids

A class of steroid hormones produced in the adrenal cortex or synthesized; used medicinally to reduce inflammation and affect the immune system.