ill. Quantitative Question (ILO:11/01) (183) Suppose in an interest rate swap the notional principal is $10,000,000 with a swap period of 2 years. The companies agree to exchange a fired for a floating income stream. Barmko agrees to pay 5% to Darmp. Rarmko agrees to pay Bermko LIBOR- 2.5% 1a. Suppose at the end of the first year LIBOR 15 45, which party and how much will that party net? (SHOW CALCULATIONS HERE. USE NO TEXT) 113 Barmko pays Darmko: Darmko pays Barmko: Barmko nets from Darmko (1) 11) 16. Suppose that the end of the second year LIBOR is 6X, which party and how much will that party net (SHOW CALCULATIONS HERE. USE NO TEXT (1) Barmko pays Darmke: Darmko pays Barmka: Barmko nets from Darmko: (1) Over the two years Barmko nets from Darmko: (1) I 2. As a hedge. Rarm buys a two year cap on a 6 month LIBOR of $10,000,000 with current LIBOR at 4 suppose that in the first six months LIBOR risesta 4.5% second six months LIBOR rises to 5.5% third six months LIBOR rises to 6 fourth six months LIBOR rises to 7% What will be the overall cash position of Ramko, as a holder of both the interest rate swap above and the cap at 4%, at the end of two years? (Assume the cost of the cap is $100,000) (SHOW CALCULATIONS HERE. USE NO TEXT) (1) 1 six months 2nd six months LAM) 11 ) JH six months 11) 4th six months Sum over two year period) it) After hedge of the t-rate swap with the cap, the net position of Darmko 12