A U$.$S$.$ bank agrees to a swap of making fixed$-$rate interest payments of $$12$ million to a UK bank in exchange for floating$-$rate payments of LIBOR $+4$ percent in British pounds for a notional amount of $100$ million. The current exchange rate is $$1\mathrm{.}50/.$ The interest payments will be exchanged at the end of the year at the prevailing rates.

At the end of the year, LIBOR is $4$ percent and the exchange rate is $$1\mathrm{.}50/.$ What is the net payment paid or received in dollars by the U$.$S$.$ bank?

Question $9$ options:

$1)$

The U$.$S$.$ bank paid $$12$ million and received $$8$ million for a net payment of $$4$ million.

$2)$

The U$.$S$.$ bank paid $$12$ million and received $$10$ million for a net payment of $$2$ million.

$3)$

The U$.$S$.$ bank paid $$12$ million and received $$12$ million for a net receipt of $$0$ million.

$4)$

The U$.$S$.$ bank paid $$12$ million and received $$14$ million for a net receipt of $$2$ million.

$5)$

The U$.$S$.$ bank paid $$12$ million and received $$16$ million for a net receipt of $$4$ million.