An FI has entered a $100 million swap agreement with a counterparty.The fixed-payment portion of the swap is similar to a government bond with maturity of 6 years and duration of 5 years.The swap payment interval is 1 year.If the relative shock to interest rates [ΔR/(1 + R)] is a decline of 50 basis points, what will be the change in market value of the swap contract?
A)+$2.0 million.
B)-$2.0 million.
C)+$2.5 million.
D)-$2.5 million.
E)More information is needed.

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The Answer of An FI has entered a $100 million swap agreement with a counterparty.The fixed-payment portion of the swap is similar to a government bond with maturity of 6 years and duration of 5 years.The swap payment interval is 1 year.If the relative shock to interest rates [ΔR/(1 + R)] is a decline of 50 basis points, what will be the change in market value of the swap contract?
A)+$2.0 million.
B)-$2.0 million.
C)+$2.5 million.
D)-$2.5 million.
E)More information is needed.

An FI Has Entered a $100 Million Swap Agreement with a Counterparty.The