Question

Aqua Boat Company recently issued floating rate debt. The rate is LIBOR + 3 percent, reset semi-annually. Compost Earth Company has recently issued fixed rate debt. The rate is 5 percent per year. Aqua and Compost have entered into a two-year interest rate swap with a notional value of $1.0 million. Aqua agrees to pay 6 percent fixed; Compost agrees to pay LIBOR + 2 percent. Payments are exchanged every six months based on LIBOR at the beginning of the six-month period. Determine the interest rate swap net payments forAqua.


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  • CreatedFebruary 25, 2015
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