QUESTIONS 91 THROUGH 96 RELATE TO DERIVATIVE INVESTMENTS.

95. Laurent Calkoen entered into an equity swap where he will have to pay the fixed rate of a bond set at 7% per annum and will receive the returns on an equity index. Suppose the equity index at the beginning and at the end of first year is at 1,250 and 1,200. What is the payoff from this swap position if the notional principal is $1 million? A. Loss of $111,667 B. Loss of $110,000 C. Loss of $30,000