A corporation enters into a $40 million notional amount interest rate swap. The swap calls for the corporation to pay fixed rate and receive a floating rate of LIBOR. The payments will be made every 90 days for one year and will be based on the 90/360 adjustment factor. The term structure of LIBOR when the swap is initiated:

Term Rate Discount Bond Price

90 days 8.10% ?

180 days 8.45 ?

270 days 8.5 ?

360 days 8.65 ?

e. What is the net payment? Does the fixed or floating rate payer owe?

Assume it is now 30 days later. The new term structure is as follows:

Days Rate (%)

60 7.90 ?

150 8.25 ?

240 8.30 ?

330 8.45 ?

Here are the new discount bond prices:

Term Rate Discount Bond Price

60 days 7.9% B30(60) = 1/(1 + 0.079(60/360)) = 0.9870

150 days 8.25 B30(150) = 1/(1 + 0.0825(150/360)) = 0.9667

240 days 8.30 B30(240) = 1/(1 + 0.0830(240/360)) = 0.9476

330 days 8.45 B30(330) = 1/(1 + 0.0845 (330/360)) = 0.9281

f. For $1 notional, what is the value of the remaining fixed payments? (round to 4 decimals)

g. For $1 notional, what is the value of the remaining floating payments? (round to 4 decimals)

h. What is the value of the swap (in $)?