Question
2. Tiger Capital and Cowboy Savings enter into a $50 million 3 year interest rate swap. Tiger will pay Cowboy a fixed 3% (annualized) rate
2. Tiger Capital and Cowboy Savings enter into a $50 million 3 year interest rate swap.
Tiger will pay Cowboy a fixed 3% (annualized) rate twice a year. In return Cowboy will pay Tiger the 6-month LIBOR rate + .5%. Cash flows will occur twice a year.
The agreement is initiated on December 31, 2020
Show the cash flows for both Tiger Capital and Cowboy Savings based on the following LIBOR Rates
June 30, 2021 LIBOR = 2.75%
December 31, 2021 LIBOR = 2.25%
June 30, 2022 LIBOR = 3.00%
December 31, 2022 LIBOR = 3.25%
June 30, 2023 LIBOR = 3.00%
December 31, 2023 LIBOR = 2.50%
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