Refer to the previous two questions. If 90-day LIBOR rises to the levels 'predicted' by the implied forward rates, what will the dollar level of the bank's interest receipt be at the end of the third quarter?
A) £35 250.00
B) £36 375.00
C) £38 250.00
D) £41 005.50
E) None of the above

Question

Quizplus · Accepted Answer

Using the formula provided, the bank's interest receipt would be:

Interest receipt = principal x (new rate - old rate) x (days in period / 360)

= £2,500,000 x (3.8% - 3.45%) x (90 / 360)

= £41,005.50

Therefore, the best choice is D.

Refer to the Previous Two Questions