Question
Firm XYZ enters into an interest rate swap with a dealer in which it pays a floating rate of LIBOR on a notional amount of
Firm XYZ enters into an interest rate swap with a dealer in which it pays a floating rate of LIBOR on a notional amount of $50,000,000 with semiannual payments based on 30-day months and a 360-day year. In turn, it will receive a semiannual payment based on the same $50,000,000 notional amount and 30-day months and 365-day years but calculated using a fixed rate of 4.5 percent. Suppose that the LIBOR rate is 4.0% at the beginning of the swap. The net payment to firm XYZ at the first settlement six months into the swap would be:
| $102,740 | |
| $104,452 | |
| $106,164 | |
| $107,877 | |
| $109,589 |
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