### Question details

Both firms owe the same amount therefore net payment is zero
\$ 15.00

QUESTION 1 Interest rate swap: Consider a \$30 million notional principal interest rate swap. The fixed interest rate is 7%, paid quarterly on the basis of 90 days in a quarter and 360 days in a year. The first floating interest rate payment is set at 7.2%. Calculate the first net payment.
\$15,000
\$20,000
\$525,000
QUESTION 2 [REPEAT] Interest rate swap: Consider a \$30 million notional principal interest rate swap. The fixed interest rate is 7%, paid quarterly on the basis of 90 days in a quarter and 360 days in a year. The first floating interest rate payment is set at 7.2%. Identify which party (fixed or floating) pays the net amount.
Party paying floating
Both firms owe the same amount. Therefore net payment is zero
Incomplete information
QUESTION 3 In a plain vanilla interest rate swap, one party pays the ____ to receive the ____
Swap rate; fixed rate
Floating rate; fixed rate
Fixed rate; swap rate
Swap rate; floating rate
QUESTION 4 Interest rate swap: Suppose in an interest rate swap, the floating rate is set equal to LIBOR plus 75 basis points. The fixed rate is 5.5%. What is the floating interest rate if the notional principal is \$25 million and LIBOR is 4.5%?
5.25%
4.5%
5.5%
None of the above
QUESTION 8 For this and the next 3 questions. Currency swap: Consider a currency swap between Party X in the USA and Party Y in Switzerland. The swap is for \$10 million and SF15 million. Party Y pays dollars of interest to X at a fixed interest rate of 9 percent. Party X in USA pays Swiss francs (SF) at a fixed rate of 8 percent. The payments are made semi-annually based on the exact day count and 360 days in a year. The current period has 181 days. At the initiation of the swap, how much will Party X owe (deliver to) Party Y?
\$10 million
SF 15 million
SF5 million
none of the above
QUESTION 9 At the initiation of the swap, what exchange rate is implied in the amounts exchanged?
\$0.67
\$1.00
None of the above
QUESTION 10 Calculate the next payment that Party X will make.
SF603,333.33
\$603,333.33
\$452,500
None of the above
QUESTION 11 Calculate the next payment that Party Y will make.
\$603,333.33
\$452,500
SF452,500
None of the above
QUESTION 12 For this and the next 2 questions. Interest rate swap: Design an interest rate swap for the two firms described below. Achimota Foods wishes to take out a floating interest loan while Tamale Systems would like to issue a fixed rate loan.
Achimota Foods
Tamale Systems
Fixed
15%
19%
Floating
Libor + 3%
Libor + 5%
Suppose the gains are to be divided in the following manner: 80% for Achimota and 20% for Tamale.
QUESTION 13 Based on the ratios for splitting up the quality swap, how much is the net savings due to Achimota?
1.6%
0.4%
1.0%
None of the above

### Solutions

Available solutions
• Both firms owe the same amount therefore net payment is zero
\$15.00

QUESTION 1 Interest rate swa

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