Reference no: EM131878805

Risk Adverse Company issued 5 Year Bonds worth $1,000,000 on January 1, 2010 with interest payable each year. The bonds were set up as floating rate debt with an interest payable each year. The bonds were set up as floating rate debt with an interest rate set to LIBOR plus 5%. On the same date, Risk Adverse entered into a swap agree with Speculative Bank because they wanted fixed rate interest payments to hedge their interest cash flow of the debt instrument. The LIBOR rate was 4% on January 1 ,2020 and the fixed interest rate on the swap was set to 9% on this date. 9. If the LIBOR rate is 5% on December 31, 2010 there will more than likely be an unrealized _________________ on the swap on December 31, 2010. A. Gain B. Loss C. Neither D. Cannot be determined