First National Bank Has Made a 5-Year, $100 Million Fixed-Rate

Multiple Choice

First National Bank has made a 5-year, $100 million fixed-rate loan at 10%. 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% for 5 years, what is the notional principal of the swap?

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