Consider a hypothetical 2.5-year swap initiated on 03/08/2021, between Company A and Company B. Company A...

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Consider a hypothetical 2.5-year swap initiated on 03/08/2021, between Company A and Company B. Company A agrees to pay to Company B an interest rate of 5% per annum on a notional principal of $100 million and in return Company B agrees to pay Company A the six-month LIBOR on the same notional principal. The agreement specifies that payments are to be exchanged every 6 months and the 5% interest rate is quoted with semiannual compounding. Please calculate the cash flows for Company A: Date Mar. 8, 2021 Sept. 8. 2021 Mar. 8, 2022 Sept. 8, 2022 Mar. 8, 2023 Sept. 8, 2023 LIBOR Floating Cash Flow ($ Millions) Mar. 8, 2021 Sept. 8, 2021 Mar. 8, 2022 Sept. 8. 2022 Mar. 8, 2023 Sept. 8, 2023 4.2% 4.6% 5.2% 5.4% 5.6% 5.8% Please calculate the cash flows for Company B: Date LIBOR Floating Cash Flow ($ Millions) 4.2% 4.6% 5.2% 5.4% 5.6% 5.8% FIXED Cash Flow Net Cash Flow ($ Millions) ($ Millions) FIXED Cash Flow Net Cash Flow ($ Millions) ($ Millions) Consider a hypothetical 2.5-year swap initiated on 03/08/2021, between Company A and Company B. Company A agrees to pay to Company B an interest rate of 5% per annum on a notional principal of $100 million and in return Company B agrees to pay Company A the six-month LIBOR on the same notional principal. The agreement specifies that payments are to be exchanged every 6 months and the 5% interest rate is quoted with semiannual compounding. Please calculate the cash flows for Company A: Date Mar. 8, 2021 Sept. 8. 2021 Mar. 8, 2022 Sept. 8, 2022 Mar. 8, 2023 Sept. 8, 2023 LIBOR Floating Cash Flow ($ Millions) Mar. 8, 2021 Sept. 8, 2021 Mar. 8, 2022 Sept. 8. 2022 Mar. 8, 2023 Sept. 8, 2023 4.2% 4.6% 5.2% 5.4% 5.6% 5.8% Please calculate the cash flows for Company B: Date LIBOR Floating Cash Flow ($ Millions) 4.2% 4.6% 5.2% 5.4% 5.6% 5.8% FIXED Cash Flow Net Cash Flow ($ Millions) ($ Millions) FIXED Cash Flow Net Cash Flow ($ Millions) ($ Millions)

Answer rating: 100% (QA)

Given that the fixed interest rate is 5 per annum with semiannual compounding the semiannual fixed rate is 25 The notional principal is 100 million For Company A Mar 8 2021 Fixed Cash Flow 25 2 100 mi... View the full answer