Question: ABC Corp has a floating-rate liability and wants a fixed-rate exposure. They enter into a 2-year quarterly-pay $3.5 million fixed-for-floating swap as the fixed-rate payer.

ABC Corp has a floating-rate liability and wants a fixed-rate exposure. They enter into a 2-year quarterly-pay $3.5 million fixed-for-floating swap as the fixed-rate payer. The counterparty is XYZ Corp. The fixed-rate is 4.9% and the floating rate is 90-day LIBOR+ 1.4%, with both calculated based on a 360-day year. The annualized LIBOR are:

Current 5.0%

In 1 quarter 5.5%

In 2 quarters 5.4%

In 3 quarters 5.8%

In 4 quarters 6.0%

Assume that a month's day count is 30 days and a year is 360 days. The absolute value of the second net swap payment is:

A.$ 64662.50

B.$ 17500.00

C.$ 60375.00 D.$ 0 or no net payment

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