Suppose on 10 June the six-month Libor interest rate is 3.44 per cent per year paid annually and the 12 month Libor interest rate is 3.25 per year per year paid annually. You enter into a 2-year swap, and agree to pay a fixed rate of 3.25 per year paid annually against receiving Libor, with 6 monthly interest payments on a principal of €10 million. 

What sum of money do you expect to pay/ receive on the swap on May 15th?

Answer rating: 100% (QA)

Since the swap is for 2 years with semiannual payments there will be a total of 4 payments The first payment will be made on November 15th 4 months af... View the full answer