单选题 No Errors Printing has entered into a "plain-vanilla" interest rate swap on $1000000 notional principal. No Errors receives a fixed rate of 5.5 percent on payments that occur at quarterly intervals. Platteville Investments, a swap broker, negotiates with another firm, Perfect Bid, to take the pay-fixed side of the swap. The floating rate payment is based on LIBOR (currently at 6.0 percent). Because of the current interest rate environment, No Errors expects to pay a net amount at the next settlement date and has created a reserve to cover the cash outlay. At the time of the next payment ( due in exactly one quarter), the reserve balance is $1000. To fulfill its obligations under the swap, No Errors will need approximately how much additional cash?

A、

A. $250.
B、

B. $0.
C、

C. $667.

【正确答案】 A

【答案解析】
The net payment formula for the floating rate payer is:
Floating Rate Payment_t = ( LIBOR_t-1 - Swap Fixed Rate ) × ( days in term/360 ) × Notional Principal.
If the result is positive, the floating-rate payer owes a net payment and if the result is negative, then the floating-rate payer receives a net inflow. Note: We are assuming a 360 day year. Here, Floating Rate Payment = (0.06 -0.055) × (90/360) × 1000000 = $1250. Since the result is positive, No Errors will pay this amount. Since the reserve balance is $1000, No Errors needs an additional $250.