An interest rate swap that would eliminate the company’s gap, if the finance company you manage has a gap of +5$ million (rate-sensitive assets greater than rate-sensitive liabilities by $5million) Context Introduction: An interest rate swap is an agreement between two parties in which one party pays a future payment to another party of which interest rate is decided at the present day. This is usually done when there is a difference between floating interest rate and fixed interest rate. If fixed interest rate is more than a floating interest rate, then party in agreement would like to pay principle amount with floating interest rate at the future date.

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Chapter 14, Problem 8Q

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An interest rate swap that would eliminate the company’s gap, if the finance company you manage has a gap of +5$ million (rate-sensitive assets greater than rate-sensitive liabilities by $5million)

Context Introduction:

An interest rate swap is an agreement between two parties in which one party pays a future payment to another party of which interest rate is decided at the present day. This is usually done when there is a difference between floating interest rate and fixed interest rate. If fixed interest rate is more than a floating interest rate, then party in agreement would like to pay principle amount with floating interest rate at the future date.

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Labor Market Data Price $5 $10 $15 $20 $25 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000 Qd 15,000,000 12,000,000 9,000,000 6,000,000 3,000,000 Price $30 $25 $20 $15 $10 $5 + +- x- 3 6 Do + + F 9 12 15 Quantity (In millions) Area of a triangle = 1/2* base *height Market Efficiency & Total Surplus Worth Publishers SCENARIO: The state government is considering raising the minimum wage from $15 per hour to $20 per hour over the next 3 years. As an economic advisor to the governor, you have been asked to provide a recommendation on whether the minimum wage should be increased based on economic theory. Consider the labor market data provided. Prepare a brief report that: 1. Explains whether the labor market is currently efficient at the equilibrium wage of $15 per hour. How would you know? At equilibrium, what (dollar amount) is the Total Surplus this market provides? Show your rationale with numbers. 2. Analyzes the impact on total surplus in the market if the minimum wage is raised…