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6. Suppose that on Dec. 31, 2006, Company A and Company B enter into a five-year swap with the following terms: Company A pays Company
6. Suppose that on Dec. 31, 2006, Company A and Company B enter into a five-year swap with the following terms: Company A pays Company B an amount equal to 6% per annum on a notional principal of $20 million. Company B pays Company A an amount equal to one-year LIBOR + 1% per annum on a notional principal of $20 million. Assume that LIBOR is 5.5%.
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