Question
Consider the following swap. Fixed Floating Microsoft 3.00% Libor + 0.5% Apple 3.70% Libor + 0.55% Calculate the net cash flows in the table provided
Consider the following swap.
Fixed | Floating | |
Microsoft | 3.00% | Libor + 0.5% |
Apple | 3.70% | Libor + 0.55% |
Calculate the net cash flows in the table provided below.
Relevant information: 3 year loan, $600,000,000, simple compounding. There is a swap dealer which has a fee of 15 basis points (0.15%). Microsofts savings are twice the amount of Apple's savings.
The Libor rates for each year are as follows;
Year 1 = 2.5%, Year 2 = 2.3%, Year 3 = 2.1%
Both companies are borrowing money, therefore, they have cash outflows. Hence, positive numbers mean that money is flowing out of the company. The Swap Dealer earns a fee from the service it provides, meaning that positive numbers would be cash inflows. Show all steps and calculations for each cash flow.
Microsoft | Apple | ||||||
Year | Microsoft's bank | Swap Dealer | Net total cash flow | Apple's bank | Swap Dealer | Net total cash flow | Swap Dealers's net total cash flow |
1 | |||||||
2 | |||||||
3 |
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