Find the Approximate Upcoming Net Payment on an Equity Swap

question 4

Multiple Choice

Find the approximate upcoming net payment on an equity swap in which party A pays the return on stock index 1 and party B pays the return on stock index 2.The notional amount is $25 million.Stock index 1 starts the period at 1500 and goes up to 1600 at the end of the period.Stock index 2 starts the period at 3500 and goes up to 3300 at the end of the period.

• A)The party paying index 1 pays about $238,000
• B)The party paying index 2 pays about $238,000
• C)The party paying index 2 pays about $3.095 million
• D)The party paying index 1 pays about $25 million
• E)The party paying index 1 pays about $3.095 million

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Definitions:

Classical Conditioning

Classical conditioning is a learning process through which an association is made between a naturally occurring stimulus and a previously neutral stimulus.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired; a response that is first elicited by the second stimulus is eventually elicited by the first stimulus alone.

Negative Reinforcement

A behavioral principle where the removal of an unfavorable event or outcome after the display of a behavior increases the likelihood of that behavior being repeated in the future.

Fixed-Ratio Schedule

A schedule of reinforcement where a response is rewarded only after a specified number of responses have been made.