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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.

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$525,000QUESTION 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 floatingBoth firms owe the same amount. Therefore net payment is zeroIncomplete informationQUESTION 3 In a plain vanilla interest rate swap, one party pays the ____ to receive the ____Swap rate; fixed rateFloating rate; fixed rateFixed rate; swap rateSwap rate; floating rateQUESTION 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 aboveQUESTION 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 millionSF 15 millionSF5 millionnone of the aboveQUESTION 9 At the initiation of the swap, what exchange rate is implied in the amounts exchanged?$0.67$1.00None of the aboveQUESTION 10 Calculate the next payment that Party X will make.SF603,333.33$603,333.33$452,500None of the aboveQUESTION 11 Calculate the next payment that Party Y will make.$603,333.33$452,500SF452,500None of the aboveQUESTION 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 FoodsTamale SystemsFixed15%19%FloatingLibor + 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

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******** 1 Interest **** ***** ******** a *** ******* ******** principal interest rate **** *** ***** ******** rate is ** **** quarterly ** *** ***** ** ** **** ** * quarter *** *** days ** * **** *** ***** ******** interest rate ******* is *** at 72% ********* *** ***** net ********************************** * ******** Interest **** ***** Consider * $30 million notional ********* ******** rate **** *** fixed interest **** ** 7% **** ********* ** *** basis ** ** **** ** * quarter *** *** days ** a year *** ***** ******** ******** **** ******* ** *** ** 72% ******** ***** party ****** ** floating) **** the *** amountParty ****** ************ firms *** the same ****** Therefore *** payment ** ************** ******************* 3 ** * ***** ******* ******** rate **** one ***** **** the ____ ** receive the ******** ***** ***** ************ rate; ***** ********* rate; swap ******** ***** ******** ************ 4 ******** rate ***** ******* ** an ******** rate **** *** floating **** is *** ***** ** LIBOR plus ** ***** ****** The ***** rate ** *** **** ** *** ******** ******** **** if *** ******** principal is *** million *** ***** is ****************** ** *** ************* * *** **** and *** **** * ********* Currency swap: ******** * ******** swap ******* Party * in *** *** *** ***** * ** Switzerland *** swap ** for *** ******* *** **** million ***** * **** dollars ** ******** ** * ** a fixed ******** **** ** 9 ******* Party * ** *** **** ***** ****** **** ** a ***** **** of * ******* *** ******** are **** ************* ***** ** the ***** *** ***** *** *** **** ** * **** *** current ****** *** *** **** ** *** ********** ** *** **** *** **** **** ***** * *** ******** *** ***** Y?$10 millionSF ** ********** millionnone ** *** aboveQUESTION * ** *** ********** ** *** **** **** ******** **** is ******* ** *** ******* ********************** ** *** ************* 10 ********* the next ******* that ***** X will ********************************** of *** ************* ** Calculate *** **** payment that ***** * will ******************************** ** the ************* ** *** **** and *** **** 2 ********* ******** **** swap: ****** ** ******** **** swap *** the two ***** described ***** ******** Foods wishes ** take *** * ******** interest **** while ****** ******* ***** like to ***** a ***** **** ************ *********** ******************************* + ******* + ********* the gains are ** ** ******* ** *** following ******* *** *** ******** *** *** *** ************** ** ***** ** *** ****** *** splitting up *** quality **** how much ** *** net ******* *** ** Achimota?16%04%10%None of the *****

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