A bank today makes $100 in 3-year loans with a 16% fixed annual interest rate. It funds the loans today with $100 in 1-year CDs that currently have a 7% annual interest rate. It has the option of entering an interest rate swap contract. The contract includes a variable rate of 4.5% and a fixed rate of 7.5%. If the bank chooses to hedge its interest rate risk using a $100 notional value swap contract, what is the bank's expected net interest income in the first year if all interest rates remain the same throughout the year? A) $9 B) 12 OC) $7 OD) $16

If you are the floating-rate payer in an interest rate swap, paying LIBOR + 40bp with a notional value of $1,000,000 and LIBOR turns out to be 0.72%, 0.83%, 0.91% and 1.03% at the four annual payment dates, what are your dollar payment obligations at those dates?

Please explain all calculations and actions please: You are about to sign an interest swap to pay fixed and receive floating. The quote is 4.5-4.7% against LIBOR flat. The principal is 100,000. What is the value of the swap? (please use a fixed rate to discount the cash flows.) Round to the nearest US cent (2 decimal places).

The small firm wants a 1-year fixed-rate loan. A bank's base rate is 6.14 percent. Adjustment for default risk for this firm is 4.4 percent. Competitive risk factor adjustment is 1.8 percent. The bank's money market manager reports that 1-year Treasury securities sell for 0.85 basis points above a 3-month Treasury bill. Given this information, calculate the bank's loan-pricing for this firm. Round the answer to two decimal places. Please write % sign in the units box. Your Answer: Answer units

A bank’s position in OTC options on the dollar-euro exchange rate with a current Delta of -400 and a current Vega of 771. The exchange rate (dollars per euro) is 1.16 and the volatility of the exchange rate is 23.8% per annum. If the volatility of the exchange rate was to suddenly change to 27.4% per annum, what would be your best estimate of the change in the value of the bank’s position in OTC options? Your answer should be a number without any currency sign and if the change is a decrease then there should be negative sign at the front (i.e., if the value goes up by $100 you should write 100, but if it goes down by $100 you should write -100).

In September 2020, swap dealers were quoting a rate for five-year euro interest-rate swaps of 4.5% against Euribor (the short-term) interest rate for euro loans). Euribor at the time was 4.1%. Suppose that A arranges with a dealer to swap a €10 million five-year fixed- rate loan for an equivalent floating-rate loan in euros, answer the following: (Leave no cells blank - be certain to enter "0" wherever required.) a. Assume the swap is fairly priced. What is the value of this swap at the time that it is entered into? Swap value b. Suppose that immediately after A has entered into the swap, the long-term interest rate rises by 1%. Who gains and who loses? Dealer gains; A loses O A gains; Dealer loses c. What is now the value of the swap to A for each €1,000 of par value? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Swap value

You are thinking about entering into a 3 year plain vanilla swap with annual payments and a notional principal of $5,000,000. If you plan to pay the fixed rate on the swap what would you expect to pay if annual interest rates are listed below per annum with continuous compounding? Year Rate 1 3.00% 2 3.50% 3 4.50% A) $53,221.46 B) $150,000.00 C) $183,333.33 D) $227,411.44 E) $372,407.89 The answer is D. Show all work to reach D, no Excel.

a) Suppose you see Citibank’s USD-denominated 5-year interest rate swap numbers quoted at 4.25% bid and 4.45% ask. Mary tells you that the relevant fixed-rate cash flow of the swap she just entered is 4.25%. Did Mary buy or sell the IRS she just entered?     b) IF Mary (from a) is a speculator, is Mary betting on/forecasting a decline in interest rates or betting on/forecasting a rise in interest rates?

28. Consider a bank dealer who faces the following spot rates and interest rates. What should he set his 1- year forward ask price at? Bid So(S/E) S1.42 = €1.00 F360(S/E) A. $1.4324/€ B. $1.4358/€ C. $1.4662/€ D. $1.4676/€ Ask $1.45 = €1.00 Borrowing 4.25% APR is je 3.10% APR Lending 4% APR 3% APR

Suppose that the term structure of risk-free interest rates is flat in the United States and Australia. The USD interest rate is 5.9% per annum and the AUD rate is 5.7% per annum. The current value of the AUD is 0.57 USD. Under the terms of a swap agreement, a financial institution pays 2.0% per annum in AUD and receives 5.0% per annum in USD. The principals in the two currencies are $12 million USD and 20 million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last two more years. What is the USD value of the swap to the financial institution? Assume all interest rates are continuously compounded. Enter your answer rounded to the nearest integer,