Citibank and ABM Company enter into a five year interest rate
Citibank and ABM Company enter into a five-year interest rate swap with a notional principal of $100 million and the following terms: Every year for the next five years, ABM agrees to pay Citibank 6% and receive from Citibank LIBOR. Using the following information about LIBOR at the end of each of the next five years, determine the cash flows in the swap.
Year LIBOR (%)
1 .......... 5.0
2 .......... 5.5
3 .......... 6.2
4 .......... 6.0
5 .......... 6.4
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