Question: C. JTM's can swap its bonds as per the data below. You are asked to show the cash flows for the fixed and floating scenarios

C. JTM's can swap its bonds as per the data below. You are asked to show the cash flows for the fixed and floating scenarios and the net difference each year plus the net overall difference undiscounted and discounted using a 5% discount rate. Show all fixed and floating payments as negative cash flows. Net benefits use the formula: floating payments minus fixed payments. State whether the swap is better or worse in the space provided. c. Interest Rate Swap Cash Flows Bond outstanding 500 Fixed Floating Net Maturity (yrs.) 10 Year 1 (84,850,734.0) (84,695,543.1) 155,190.9 Fixed rate 4.5% Year 2 (80,488,470.3) (80,388, 705.8) 99.764.5 Spread over BSTBY 2.45% Year 3 (76,232,931.3) (76,716,698.1) (483,766.7) BSTBY: Year 4 (72,035,125.6) (72,308,432.7) (273,307.0) Years 1-2 2.0% Year 5 (67,804,712.9) (68,196,684.2) (391,971.4) Years 3-4 2.3% Year 6 (63,325,715.9) (63,251,532.3) 74.183.6 Years 5-7 2.5% Year 7 (57,749,114.0) (57,137,302.9) 611,811.1 Undiscounted Net (208,095.0) Discounted Net (221,416.2)

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