Multiple Choice
Chameleon Ltd has a fixed interest rate borrowing of $1 million at 10% p.a.for five years and wishes to swap to a floating rate loan.In the swap,Chameleon pays the fixed interest payment of $100 000 on the loan and the final balloon payment.It agrees to pay a financial intermediary a variable amount at the bank-accepted bill interest rate on the $1 million and the financial intermediary pays Chameleon a fixed rate of 10% p.a.What is the result of this swap by Chameleon?
A) Chameleon has effectively borrowed $1 million at the bank-accepted bill rate.
B) Chameleon has effectively borrowed $1 million at the fixed interest rate.
C) Chameleon has effectively borrowed $100 000 at the bank-accepted bill rate.
D) Chameleon has effectively borrowed $100 000 at the fixed interest rate.
Correct Answer:
Verified
Correct Answer:
Verified
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