PART I

1) A US company has entered into an interest rate swap with a dealer in which the notional principal is $50 million.The company will pay a floating rate of LIBOR and receive a fixed rate of 5.75%.Interest is paid semi-annually, and the current LIBOR=5.15%.What is the total amount that the asset manager will pay to (or receive from)the dealer EVERY half of the year after cash settlement ? Assume that every year we have 360days,and each semi-annual payment is made on 180days from the last payment.

[Note: You should use a positive number to represents the amount the asset managerpayto the dealer.You should use a negative number represents the amount that asset managerreceivefrom the dealer]

PART II

QUESTION 1

1. The party agreeing to make a fixed-rate payment might also be required to make another payment could happen in:

a)Equity swap

b) None above are possible to see that happening

20 points

QUESTION 4

1. Suppose a US firm operating in the European region. The US firm wants to convert all the euros back to USD, and therefore, the US firm wants to enter a currency swap. Which one of the following action is wrong regarding the currency swap?

a) Time=0, the US firm deposit Euros to the European bank

b)At every payment time, the US firm receive USD from the European bank

c)At the end of the contract, the US firm collect deposits from the European bank