Question: Company BFC Pty Ltd entered a three-year interest rate swap as the fixed rate receiver, and the swap has exactly three months remaining. Under the

Company BFC Pty Ltd entered a three-year interest rate swap as the fixed rate receiver, and the swap has exactly three months remaining. Under the terms of the swap, the company receives 4% per annum (compounded quarterly) and pays three-month LIBOR. The swap has quarterly resets against LIBOR and all interest rates are compounded quarterly. Currently the 3-month LIBOR rate is 4.5% per annum.

The current value of the swap to BFC Pty Ltd is:

1 Positive.

2 Impossible to determine without more information.

3 Zero.

4 Negative.

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