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Cash Flows Bond outstanding Original Swap Pmts. Net Maturity (yrs.) Year 1 Fixed rate Year 2 Spread over LIBOR Year 3 LIBOR: Year 4 Years

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Cash Flows
Bond outstanding Original Swap Pmts. Net
Maturity (yrs.) Year 1
Fixed rate Year 2
Spread over LIBOR Year 3
LIBOR: Year 4
Years 1-2 Year 5
Years 3-4 Year 6
Years 5-6 Year 7
Years 7-10 Year 8
Year 9
Year 10
Present value of net
c. Because its financial position has strengthened considerably very recently, Apache Airlines is offered an interest rate swap-fixed to floating (LIBOR). The details are as follows: Current Apache bond maturity - 10 years Bond face value - $200M Current bond rate - 6% per year, fixed Floating rate - LIBOR + 100 basis points Projected LIBOR rates: 4.5% (years 1-2),5% (years 3-4), 5.5% (years 5-6),5% (years 7-10) Show the cash flows for Apache and the present value gain/loss of doing the swap

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