Question: 4. A German company that has issued floating-rate notes now believes that interest rates will rise. It decides to protect itself against this possibility by

4. A German company that has issued floating-rate notes now believes

4. A German company that has issued floating-rate notes now believes that interest rates will rise. It decides to protect itself against this possibility by entering into an interest rate swap with a dealer. In this swap, the notional principal is 25 million and the company will pay a xed rate of 5.5 percent and receive Euribor. The current Euribor is 5 percent. Calculate the rst payment and indicate which party pays which. Assume that oating-rate payments will be made on the basis of 90/360 and xed-rate payments will be made on the basis of 90/365

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