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

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 [ $\Delta$ R/(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.

Correct Answer:

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