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A swap agreement calls for Durbin Industries to pay interest annually, based on a rate of 1.5% above the one-year T-bill rate, currently 6%. In
A swap agreement calls for Durbin Industries to pay interest annually, based on a rate of 1.5% above the one-year T-bill rate, currently 6%. In return, Durbin receives interest at a rate of 6% on a fixed-rate basis. The notional principal for the swap is $50,000. a) What is the name of this type of a swap agreement? b) What is Durbins net interest for the year after entering into the agreement? c) Why would be Durbin Industries interested in this agreement? d) What are the advantages and disadvantages of this type of swaps
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