Question

Consider the following interest-rate swap:
• The swap starts today, January 1 of year 1 (swap settlement date)
• The floating-rate payments are made quarterly based on actual / 360
• The reference rate is 3-month LIBOR
• The notional amount of the swap is $40 million
• The term of the swap is three years
Answer the below questions.
(a) Suppose that today’s 3-month LIBOR is 5.7%. What will the fixed-rate payer for this interest rate swap receive on March 31 of year 1 (assuming that year 1 is not a leap year)?
(a) Suppose that today’s 3-month LIBOR is 5.7%. What will the fixed-rate payer for this interest rate swap receive on March 31 of year 1 (assuming that year 1 is not a leap year)?
(b) Assume the Eurodollar futures price for the next seven quarters is as follows:
(c) What is the floating-rate payment at the end of each quarter for this interest-rate swap?


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  • CreatedAugust 22, 2015
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