Question: PUT EXCEL FORMULAS Answer this question in a sheet that you name Swap . A firm has a five-year obligation ($80 million notional principal) on

PUT EXCEL FORMULAS

Answer this question in a sheet that you name Swap. A firm has a five-year obligation ($80 million notional principal) on which it must pay a floating rate. The firm wants to decrease the interest rate sensitivity of its liabilities, and swap for fixed rate payments. Relevant bond price-yield information is provided below.

Mat. Date

Current Floating Rate

Spot Rate

Implied Fwd Rate

Nov 20

1.29%

May 21

1.52%

1.75%

Nov 21

1.89%

2.63%

May 22

2.16%

2.97%

Nov 22

2.36%

3.16%

May 23

2.63%

3.99%

Nov 23

2.86%

4.25%

May 24

3.01%

4.06%

Nov 24

3.20%

4.73%

May 25

3.29%

4.10%

a. Calculate the present value of the expected floating rate payments. Put the answer in cell B2.

b. Calculate the fixed rate that the firm will have to pay on the swap. Put the answer in cell B3.

The sheet must be interactive, so if a user pastes a new set of spot rates, the answers to (a) and (b) should update correctly.

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