Suppose the quote for a five-year swap with semiannual payments is 8.50−8.60 percent in dollars and 6.60−6.80 percent in euro against six-month dollar LIBOR.This means
A)the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate dollar payments of 8.50 percent against receiving semiannual fixed-rate euro payments of 6.80.
B)the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate euro payments of 6.60 percent against receiving semiannual fixed-rate dollar payments of 8.60.
C)the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate dollar payments of 8.50 percent against receiving semiannual fixed-rate euro payments of 6.80,and the swap bank will enter into a currency swap in which it would pay semiannual fixed-rate euro payments of 6.60 percent against receiving semiannual fixed-rate dollar payments of 8.60.
D)none of the options

Question

Quizplus · Accepted Answer

The quote for a five-year swap with semiannual payments is given in two parts; 8.50−8.60 percent in dollars and 6.60−6.80 percent in euros, against six-month dollar LIBOR. This means that the swap bank will enter into two currency swaps, one in which it would pay semiannual fixed-rate dollar payments of 8.50 percent against receiving semiannual fixed-rate euro payments of 6.80, and the other in which it would pay semiannual fixed-rate euro payments of 6.60 percent against receiving semiannual fixed-rate dollar payments of 8.60. Therefore, the correct choice is C.

Suppose the Quote for a Five-Year Swap with Semiannual Payments