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