You enter a 2-year pay-fixed receive-floating interest rate swap with semi-annual payments on a notional principal of
Fantastic news! We've Found the answer you've been seeking!
Question:
You enter a 2-year pay-fixed receive-floating interest rate swap with semi-annual payments on a notional principal of $20 million and the current term structure of interest rates is below based on a 360-day year.
L0(180) = | 0.040 |
L0(360) = | 0.050 |
L0(540) = | 0.060 |
L0(720) = | 0.070 |
A. What is the swap fixed rate?
B. What is the first net payment? Who makes the payment?
C. 180 days later, the new term structure of interest rates is below. Based on this new term structure, what is the value of the swap to you at 180 day?
L180(180) = | 0.030 |
L180(360) = | 0.040 |
L180(540) = | 0.050 |
Posted Date: