Sample Quiz 4

Sample Quiz 4 - Version Fin 536 Sample Quiz 4 Name_...

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Version Fin 536 Sample Quiz 4 Name____________ Section________ Note: You must review all potential topics for the quiz. This sample quiz does not cover all testable topics. Use the following table of swap quotes when you need to. 1. Fill out the answers. a. (Interest rate swap) National Bank has $200b Adjustable Rate Mortgage (ARM) as assets on its balance sheet. The interest rate on the ARM is typically 5%+Libor. The bank is considering hedging risk in the interest income from the ARM with a three-year interest rate swap. The bank should be paying ________________(floating/fixed) rate interest in the swap deal. If the market interest rate (Libor) rises later, the bank has a ________________(loss/gain) in the swap trading. b. (Currency swap) If a company enters a 7-year currency swap on paying 3.4% interest rate on euros and receiving Libor rate on Swiss Francs every 12 months, then the company ________________ (lose/gain) if the interest rate (Libor) on euros increases; will ________________
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Sample Quiz 4 - Version Fin 536 Sample Quiz 4 Name_...

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