eBook

Problem 15-11

With the interest rate swap quotations shown in the Table 1, calculate the swap cash flows from the point of view of the fixed-rate receiver on a two-year swap with a notional principal of $24.5 million. You may assume the relevant part of the settlement date pattern and the realized LIBOR path shown in the Table 2 for the three-year agreement. Also, calculate the fixed-rate payment on a 30/360-day count and the floating-rate payments on an actual/360-day basis.

Table 1. U.S. Semi-Annual Fixed (30/360) vs. 6-mo. LIBOR
			Swap Fixed Rate (%)				Swap Spread (bp)
Swap Maturity			Bid	Ask	Mid		Bid	Ask
1 Yr			4.6660	4.6720	4.6690
2 Yr			4.4940	4.5010	4.4975		66.00	66.30
3 Yr			4.5410	4.5560	4.5510		69.58	70.10
4 Yr			4.6210	4.6280	4.6245		67.90	68.20
5 Yr			4.7170	4.7200	4.7185		64.50	64.90
6 Yr			4.8140	4.8140	4.8140		67.40	67.70
7 Yr			4.8840	4.8840	4.8840		66.70	67.30
8 Yr			4.9360	4.9360	4.9360		66.00	66.50
9 Yr			4.9900	4.9950	4.9945		65.60	66.90
10 Yr			5.0420	5.0450	5.0435		61.53	62.60
15 Yr			5.1920	5.1950	5.1945		70.60	70.90
20 Yr			5.2770	5.2770	5.2770		70.70	71.10
25 Yr			5.2800	5.2880	5.2840		64.60	64.90
30 Yr			5.2970	5.3020	5.2995		59.10	59.70

Table 2. Three-Year Plain Vanilla Interest Rate Swap
Settlement	Settlement		Number of	Number of	Current
Year	Date		Actual Days	30/360 Days	LIBOR
0		October 23			4.25%
1		April 23	183	180	4.40%
1		October 23	183	180	5.00%
2		April 23	182	180	5.05%
2		October 23	183	180	4.60%
3		April 23	182	180	4.35%
3		October 23	183	180	4.20%

Fill in the table below. Do not round intermediate calculations. Round your answers to the nearest cent.

Settlement	Settlement		Fixed-Rate	Floating-Rate
Year	Date		Receipt	Payment
1		April 23	$	$
1		October 23	$	$
2		April 23	$	$
2		October 23	$	$
3		April 23	$	$
3		October 23	$	$