QUESTIONS 91 THROUGH 96 RELATE TO DERIVATIVE INVESTMENTS

93. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING 2012
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING 2012
93. A portfolio manager enters into an equity swap with a swap dealer. The portfolio manager agrees to pay the return on the Value index and receive the return on the Growth index. The swap’s notional principal is $50 million and the payments will be made semi-annually. The levels of the equity indices are as follows: Index Level at Start of Swap Level 6 Months LaterValue Index 5,460 5,350Growth Index 1,190 1,200The net amount due to the portfolio manager after 6 months is closest to: A. $587,158. B. $1,007,326. C. $1,427,494.