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Reference no: EM133060875

Geriatrics Pension Fund has a $100 million investment in bonds that will provide 3.8% per annum over the next three years. Mortgage First has a floating rate investment of $100 million that yields LIBOR -0.2%. FI, a financial intermediary, arranges a swap between the two parties and charges 3 basis points per annum. Each party in the swap shares equally the bank charges. Under the terms of the swap arranged by FI, Geriatrics Pension Funds pays 4.0% fixed and receives LIBOR.

Under the swap, the net cash flows for each party are:

Select one:

  • Geriatrics Pension Fund receives LIBOR - 0.215% and Mortgage First receives 3.77%.
  • Geriatrics Pension Fund receives LIBOR - 0.2% and Mortgage First receives 3.785%.
  • Geriatrics Pension Fund receives LIBOR - 0.215% and Mortgage First receives 3.785%.
  • Geriatrics Pension Fund receives LIBOR - 0.2% and Mortgage First receives 3.77%.

Reference no: EM133060875

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