Reference no: EM132531668
Question - On July 15, 2020, Raman Corp. issues a $10,000, non-callable, 6.5% fixed-rate note at par. The note is due on July 15, 2030, with semiannual payments interest payments due each January 15 and July 15 until maturity. On the same day, Raman Corp. enters into an interest rate swap contract for $10,000 notional amount with Webb Company. Webb has a note payable of $10,000 and pays interest at a variable rate equal to Libor plus 1% throughout the term of the swap, with semiannual settlements and interest rate reset days due each January 15 and July 15 until maturity. The LIBOR rates are 5% on January 1, 2020 and 6.5% on July 15, 2020. How much money will change hands between Raman and Webb, and in what direction will it flow on July 15, 2020?
a. $175 will be paid from Webb to Raman
b. $150 will be paid from Raman to Webb
c. $75 will be paid from Raman to Webb
d. $100 will be paid from Webb to Raman
e. None of these is correct