Question
Miaoqi and Nui entered into a six year interest rate swap on May 5, 2015. The notional amount of the swap was a level 20000
Miaoqi and Nui entered into a six year interest rate swap on May 5, 2015. The notional amount of the swap was a level 20000 for all six years. The swap has annual settlement periods with the first period starting on May 5, 2015. Under the swap, Miaoqi agreed to pay a variable rate based on the one year spot rate at the beginning of each settlement period. Nui will pay Miaoqi the fixed rate of 6.2% on each settlement date. On May 5, 2017, the spot interest rate curve was as follows:
Time | 1 | 2 | 3 | 4 | 5 | 6 |
Spot Rate | 5.5% | 5.75% | 6% | 6.25% | 6.75% | 7% |
Miaoqi decides that she wants to sell the swap on May 5, 2017. Calculate the market value of the swap on May 5, 2017, from Miaoqis position in the swap.
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