On December 15, 2020 UD entered into a $100 million notional principal interest rate swap with...

 

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On December 15, 2020 UD entered into a $100 million notional principal interest rate swap with Xitadel Dayton. Payments will be on the 15th of June and December for the following three years. (a) On 12/15/2020 (t-0), the hump-shaped yield curve of annual LIBOR rates is shown in Tablel. Calculate and the swap rate in the swap agreement (allow for rounding error). Term (maturity) 180 days 360 days 540 days 720 days Table 1 LIBOR 896 8.5% 8% 796 900 days 1080 days 7% 6.5% Assuming actual 6-month annual LIBOR rates are as shown in Table 2 below for the period of the swap agreement, what will be the UD's net cash flows for each payment period starting 06/15/2021 if UD pays fixed and receives floating? Ignoring the time value, how much will be UD's total net cash flows over the three-year contract period? Table 2 Notional principal $100 million Fix rate 796 Floating rate LIBOR LIBOR Xitadel pays UD pays Ud's net CF Date 12/15/2020 06/15/2021 12/15/2021 06/15/2022 12/15/2022 06/15/2023 12/15/2023 Total 88x5854xx On December 15, 2020 UD entered into a $100 million notional principal interest rate swap with Xitadel Dayton. Payments will be on the 15th of June and December for the following three years. (a) On 12/15/2020 (t-0), the hump-shaped yield curve of annual LIBOR rates is shown in Tablel. Calculate and the swap rate in the swap agreement (allow for rounding error). Term (maturity) 180 days 360 days 540 days 720 days Table 1 LIBOR 896 8.5% 8% 796 900 days 1080 days 7% 6.5% Assuming actual 6-month annual LIBOR rates are as shown in Table 2 below for the period of the swap agreement, what will be the UD's net cash flows for each payment period starting 06/15/2021 if UD pays fixed and receives floating? Ignoring the time value, how much will be UD's total net cash flows over the three-year contract period? Table 2 Notional principal $100 million Fix rate 796 Floating rate LIBOR LIBOR Xitadel pays UD pays Ud's net CF Date 12/15/2020 06/15/2021 12/15/2021 06/15/2022 12/15/2022 06/15/2023 12/15/2023 Total 88x5854xx

Answer rating: 100% (QA)

To calculate UDs net cash flows for each payment period and the total net cash flows over the threey... View the full answer