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How much net taxable income did A recognize

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Reference no: EM132461378

Question 1 - On June 1, 2014, A and B enter into a contract with a term of 5 years. Pursuant to the contract, beginning 6/1/2015 A must make a payment to B in an amount equal to LIBOR (determined on the date immediately preceding June 1), multiplied by $500,000,000. Each June 1, beginning in 2015, B must make a payment to A equal to 2% times $500,000,000. The contract is an example of:

A. Notional principal contract

B. Forward contract

C. Futures contract

D. Option contract

Question 2 - Same facts as in Question 1, assuming LIBOR of 0.77%, how much net taxable income/(expense) did A recognize in 2014?

A. $0

B. $3,605,753

C. $5,863,014

D. ($5,863,014)

Reference no: EM132461378

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