How much does Sunny pay or receive to settle the swap for the 6-month period ending June
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How much does Sunny pay or receive to settle the swap for the 6-month period ending June 30, 2016?
Sunny Corporation has \($1,000,000\) in fixed rate debt, with an annual interest rate of 4%, and interest payments due June 30 and December 31 of each year. On January 1, 2016, it entered a receive fixed/pay variable interest rate swap, where the variable rate is LIBOR. On January 1, 2016, LIBOR is 3.8%. On June 30, 2016, LIBOR declines to 3.5% and causes the variable rate to be reset at that time. The swap qualifies for hedge accounting.
a. \($1,000\) paid
b. \($20,000\) received
c. \($19,000\) paid
d. \($1,000\) received
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