On January 1,2014,Panther Company Received a Two-Year $600,000 Loan

question 5

Multiple Choice

On January 1,2014,Panther Company received a two-year $600,000 loan.The loan calls for payments to made at the end of each year based on the prevailing market rate at January 1 of each year.The interest rate at January 1,2014,was 10 percent.Aegean company also has a two-year $600,000 loan,but Aegean's loan carries a fixed interest rate of 10 percent.
-Panther Company does not want to bear the risk that interest rates may increase in year two of the loan.Aegean Company believes that rates may decrease and they would prefer to have variable debt.So the two companies enter into an interest rate swap agreement whereby Aegean agrees to make Panther's interest payment in 2015 and Panther likewise agrees to make Aegean's interest payment in 2015.The two companies agree to make settlement payments,for the difference only,on December 31,2015.If the interest rate on January 1,2015,is 12 percent,what will be Panther's settlement payment to/from Aegean?

• A) $6,000 payment
• B) $6,000 receipt
• C) $12,000 payment
• D) $12,000 receipt

---

Definitions:

Standard Deviations

A measure of the dispersion or variability within a set of numerical data, indicating how much each value differs from the mean of the dataset.

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of many types of data; most scores fall near the mean, or average, with fewer scores at the extremes.

Standard Deviations

A numerical metric that calculates the degree of spread or distribution of a data set values around the average.

IQ Scores

Numerical measurements typically used to assess human intelligence, derived from standardized tests.