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3. On December 15, 2020 UD entered into a $100 million notional principal interest rate swap with Xitadel Dayton. Payments will be on the 15th
3. On December 15, 2020 UD entered into a $100 million notional principal interest rate swap with Xitadel Dayton. Payments will be on the 15th of June and December for the following three years. (a) On 12/15/2020 (t=0), the hump-shaped yield curve of annual LIBOR rates is shown in Table1. Calculate and the swap rate in the swap agreement (allow for rounding error). Table 1 Term (maturity) LIBOR 180 days 896 360 days 8.596 540 days 896 720 days 796 900 days 796 1080 days 6.596 (b) Assuming actual 6-month annual LIBOR rates are as shown in Table 2 below for the period of the swap agreement, what will be the UD's net cash flows for each payment period starting 06/15/2021 if UD pays fixed and receives floating? Ignoring the time value, how much will be UD's total net cash flows over the three-year contract period? Table 2 Notional principal $100 million Fix rate 79 Floating rate LIBOR Date LIBOR Xitadel pays UD pays Ud's net CF 12/15/2020 89 06/15/2021 6.596 12/15/2021 596 06/15/2022 4.5% 12/15/2022 4% 06/15/2023 396 12/15/2023 39 Total
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