Please note : answering first question by default, as HOMEWORKLIB Q&A guidelines.
Question 8
a) Interest rate swap, since the 2 parties are swapping interest rates. One is paying a fixed rate of 6% and the other one is paying a floating interest rate, based on LIBOR (benchmark)
b) The notional amount here is $100 million.
- Amount paid by Princeton Bank (6% x $100 million) = $6 million
- Amount paid by XYZ Manufacturing Corp. - LIBOR rate - (3% x $100 million) = $3 million
c) In this case also, it would be an interest rate swap. The only difference is that the reference rate would now be based on one year treasury security.
make to each otner H Princeton Bank and the XYZ Manufacturing Corp. enter into the following five-year 8 swap with...
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