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Consider a bank that has entered into a five-year swap on a notational balance of $10,000,000 with a corporate customer. The corporate customer has agreed
Consider a bank that has entered into a five-year swap on a notational balance of $10,000,000 with a corporate customer. The corporate customer has agreed to pay a fixed payment of 10 percent in exchange for LIBOR. As of the fourth reset date, LIBOR is at 5 percent and the market fixed-rate side of the swap has increased to 11 percent. What is the value of this swap to the bank immediately after the fourth reset date?
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