Consider a plain vanilla fixed for floating interest rate swap
/in Feeds /by adminConsider a plain vanilla fixed for floating interest rate swap with
a notional principal of 1,100,000 and annual payments. Initially the swap was supposed to last for five years and now three years remain. If the initial fixed rate is 0.05, LIBOR is 0.07, and the year three payment was just made (two years of payments remain on the swap), What is the absolute value of the swap?
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A steak house takes a long position on cattle futures to limit
/in Feeds /by adminA steak house takes a long position on cattle futures to limit its
risk in the case of a cattle price increase. Six months later the steak house wants to eliminate its obligation under this position before the futures contracts expire. What should the steak house do?
A) Buy Cows
B) Sell cows in the spot market.
C)Deliver Cows to the Chicago Board of Trade
D) Take a short cattle futures contract position to offset the long position
E) Sell the long futures contracts.
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