Chango Industries has decided to borrow $50,000,000.00 for six months. To reduce the company’s interest rate exposure, Chango entered into a swap whereby the dealer pays quoted fixed rate of 5.91% in exchange for receiving 3-month LIBOR at settlement date. Assuming that 3-month LIBOR is 5.6% on the rate determination day, describe the transaction that occurs between the dealer and Chango. a. The dealer is obligated to pay Chango $38,750. b. The dealer is obligated to pay Chango $31,250. c. Chango is obligated to pay the dealer $38,750. d. Chango is obligated to pay the dealer $31,250.

Chango Industries has decided to borrow $50,000,000.00 for six months. To reduce the company’s interest rate exposure, Chango entered into a swap whereby the dealer pays quoted fixed rate of 5.91% in exchange for receiving 3-month LIBOR at settlement date. Assuming that 3-month LIBOR is 5.6% on the rate determination day, describe the transaction that occurs between the dealer and Chango. a. The dealer is obligated to pay Chango $38,750. b. The dealer is obligated to pay Chango $31,250. c. Chango is obligated to pay the dealer $38,750. d. Chango is obligated to pay the dealer $31,250.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 31P

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