First National Bank Recently Made a Five-Year $100 Million Fixed-Rate

Multiple Choice

First National Bank recently made a five-year $100 million fixed-rate loan at 10 percent. Annual interest payments are $10 million, and all principal will be repaid in year 5. The bank wants to swap the fixed interest payment into floating-rate payments. If the bank could borrow at a fixed rate of 8 percent for five years, what is the notional principal of the swap?

A) $80 million
B) $100 million
C) $125 million
D) $180 million