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7.(20 points) Plain Vanilla Interest Rate Swaps A bank pays 6-month LIBOR and receives 12% per annum (with semiannual compounding) on a notional principal of
7.(20 points) Plain Vanilla Interest Rate Swaps A bank pays 6-month LIBOR and receives 12% per annum (with semiannual compounding) on a notional principal of 100 million. The swap has a remaining life of 1.25 year. The LIBOR rate with continuous compounding is 9.4% per annum 3 months ago. The LIBOR rates with continuous compounding for 3-month, 9-month, and 15- month maturities are 9.6%, 11.0%, and 13.4%, respectively. What is the current value of the swap to the party paying floating? What is the current value of the swap to the party paying fixed
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