A swap bank makes the following quotes for 5-year swaps and AAA-rated firms: USD Euro
$$\begin{array} { c c c c }
\text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \
5 \% & 5.2 \% & 7 \% & 7.2 \%
\end{array}$$
A)The bank stands ready to pay $5.2 percent against receiving dollar LIBOR on 5-year loans.
B)The bank stands ready to receive €7 percent against receiving dollar LIBOR on 5-year loans.
C)The bank stands ready to pay €7 percent against receiving dollar LIBOR on 5-year loans.
D)none of the options

Question

A swap bank makes the following quotes for 5-year swaps and AAA-rated firms: USD Euro
$$\begin{array} { c c c c } 
\text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \
5 \% & 5.2 \% & 7 \% & 7.2 \%
\end{array}$$
A)The bank stands ready to pay $5.2 percent against receiving dollar LIBOR on 5-year loans.
B)The bank stands ready to receive €7 percent against receiving dollar LIBOR on 5-year loans.
C)The bank stands ready to pay €7 percent against receiving dollar LIBOR on 5-year loans.
D)none of the options

Quizplus · Accepted Answer

The bank's ask rate for Euro is 7.2%, meaning it is willing to pay 7% (the bid rate) to receive dollar LIBOR.

A Swap Bank Makes the Following Quotes for 5-Year Swaps Bid Ask Bid Ask 5%5.2%7%7.2%\begin{array} { c c c c } \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \\5 \% & 5.2 \% & 7 \% & 7.2 \%\end{array} Bid 5%​ Ask 5.2%​ Bid 7%​ Ask 7.2%​

A Swap Bank Makes the Following Quotes for 5-Year Swaps $\begin{array} { c c c c } \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \\5 \% & 5.2 \% & 7 \% & 7.2 \%\end{array}$