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Assume that you are a swap dealer and have just acted as a counterparty in an interest rate swap. The notional principal for the swap
Assume that you are a swap dealer and have just acted as a counterparty in an interest rate swap. The notional principal for the swap was $10 million and you are now obligated to make 6 annual payments of 4% interest. The floating rate that you will receive annually is LIBOR + 2%. The LIBOR is expected to be 2.6%. Compute the net present value of your swap agreement at a discount rate of 6%?
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