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Firm A enters a 1-year swap contract with firm B at the beginning of Jan 2020 where A pays 6-month T-bill rate on a notional
Firm A enters a 1-year swap contract with firm B at the beginning of Jan 2020 where A pays 6-month T-bill rate on a notional amount of $10 million. Firm B will pays A a fixed rate of 0.5%. The payments are made quarterly beginning in 3 months. Assuming below are the 6-month T-bill rate we observe, please write out cash flow between A and B at each of the settlement date. Note all interest rate is annualized. To compute interest payment for each quarter, you can use: notional amount*interest rate*1/4 Date 6-month T-bill rate Jan 1 2020 0.2% April 1 2020 0.4% July 1 2020 0.6% Oct 1 2020 0.7% Jan 1 2021 0.3%
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