Suppose ABC Investment Banker Ltd

Multiple Choice

Suppose ABC Investment Banker Ltd., is quoting swap rates as follows: 7.50 - 7.85 annually against six-month dollar LIBOR for dollars, and 11.00 - 11.30 percent annually against six-month dollar LIBOR for British pound sterling. ABC would enter into a $/£ currency swap in which:

A) it would pay annual fixed-rate dollar payments of 7.5% in return for receiving annual fixed-rate £ payments at 11.3%
B) it will receive annual fixed-rate dollar payments at 7.85% against paying annual fixed-rate £ payments at 11%
C) a and b
D) none of the above