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A year ago, a bank entered into a $53 million five-year interest rate swap. It agreed to pay company A each year a fixed rate
A year ago, a bank entered into a $53 million five-year interest rate swap. It agreed to pay company A each year a fixed rate of 4% and to receive in return SOFR. When the bank entered into this swap, SOFR was 5%, but now interest rates have risen, so on a four-year interest rate swap the bank could expect to pay 4.5% and receive SOFR. a. Is the swap showing a profit or loss to the bank? b. Suppose that at this point company A approaches the bank and asks to terminate the swap. If there are four annual payments still remaining, how much should the bank charge A to terminate? Complete this question by entering your answers in the tabs below. Suppose that at this point company A approaches the bank and asks to terminate the swap. If there are payments still remaining, how much should the bank charge A to terminate? Note: Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your ar places
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