Quiz 6_Answers

Quiz 6_Answers - Quiz 6 1 A swap bank makes the following...

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Quiz 6 1. A swap bank makes the following quotes for 5-year swaps and AAA-rated firms: A. The bank stands ready to pay $5.2% against receiving dollar LIBOR on 5-year loans. B. The bank stands ready to receive €7% against receiving dollar LIBOR on 5 -year loans. C. The bank stands ready to pay €7% against receiving dollar LIBOR on 5 -year loans. D. The bank stands ready to receive $5% against paying dollar LIBOR on 5-year loans. 2. Suppose the quote for a five-year swap with semiannual payments is 8.50 8.60 percent in dollars and 6.60 6.80 percent in euro against six-month dollar LIBOR. This means A. the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate dollar payments of 8.50 percent against receiving semiannual fixed-rate euro payments of 6.80. B. the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate euro payments of 6.60 percent against receiving semiannual fixed-rate dollar payments of 8.60. C. both a) and b) D. none of the above
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