Consider the following swap.

	Fixed	Floating
Microsoft	3.00%	Libor + 0.5%
Apple	3.70%	Libor + 0.55%

Calculate the net cash flows in the table provided below.

Relevant information: 3 year loan, $600,000,000, simple compounding. There is a swap dealer which has a fee of 15 basis points (0.15%). Microsofts savings are twice the amount of Apple's savings.

The Libor rates for each year are as follows;

Year 1 = 2.5%, Year 2 = 2.3%, Year 3 = 2.1%

Both companies are borrowing money, therefore, they have cash outflows. Hence, positive numbers mean that money is flowing out of the company. The Swap Dealer earns a fee from the service it provides, meaning that positive numbers would be cash inflows. Show all steps and calculations for each cash flow.

		Microsoft			Apple
Year	Microsoft's bank	Swap Dealer	Net total cash flow	Apple's bank	Swap Dealer	Net total cash flow	Swap Dealers's net total cash flow
1
2
3