USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Suppose you are a loan officer for a commercial bank and one of your clients has just approached you about a one-year loan for $4,000,000. Interest on the new loan will be paid at the end of each quarter based on the prevailing level of LIBOR at the beginning of each quarter. The LIBOR yield curve in the cash market is as follows:

-Refer to Exhibit 15.7. What will the dollar level of the bank's interest receipt be at the end of the first quarter?
A) $26,500
B) $27,000
C) $28,500
D) $108,000
E) $17,000

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Suppose you are a loan officer for a commercial bank and one of your clients has just approached you about a one-year loan for $4,000,000. Interest on the new loan will be paid at the end of each quarter based on the prevailing level of LIBOR at the beginning of each quarter. The LIBOR yield curve in the cash market is as follows:
 
-Refer to Exhibit 15.7. What will the dollar level of the bank's interest receipt be at the end of the first quarter?
A) $26,500 
B) $27,000 
C) $28,500 
D) $108,000 
E) $17,000

Quizplus · Accepted Answer

The correct answer is $27,000, which is likely calculated based on the interest rate and principal amount specified in Exhibit 15.7.