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An investment bank agrees to underwrite a $200 million, 20-year, 6 percent semiannual bond issue for a manufacturing company on a firm commitment basis. The
An investment bank agrees to underwrite a $200 million, 20-year, 6 percent semiannual bond issue for a manufacturing company on a firm commitment basis. The investment bank pays the company on Monday and plans to begin a public sale on Tuesday. If interest rates rise 0.1 percent, or ten basis points (10 bps), overnight, what will be the impact on the profits of the investment bank?
a.) $4,549,125.94 loss
b.) $2,292,907.81 loss
c.) $2,292,907.81 gain
d.) $4,549,125.94 gain
e.) $5,645,255.01 gain
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