You are given the following spot rates: Years to Maturity12345 Spot Rate4.00%4.50%5.25%6.25%7.50% You enter into a 5-year interest rate swap with a notional amount of 100,000 to pay a fixed rate and to receive a floating rate based on future 1-year LIBOR rates. The swap has annual payments. If the 1-year LIBOR rate after 1 and 2 years turn out to be 5.25% and 8.10%, respectively, determine the net cash flows that you will exchange with the swap counterparty in the first three years.

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answer; ///i believe the correct answer is (c) laissez-faire;

answerblank(1) //inferiorblank(2) ramen noodles;

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.