Microsoft issues a four year, floating rate bond for the amount of $100 Million It pays annually to bondholders Because Microsoft would prefer to have a fixed rate payment, it enters into a SWAP with Citibank Year LIBOR ( ) Fixed Rate payments to Citibank Floating Rate payments from Citibank Net payment to Citibank Payment to bondholders Net payment by Microsoft 1 4 4 2 3 2 5 5 1 4 3 6 6 0 5 4 7 7 1 6 Explain the conditions of this SWAP Which is the final fixed rate that Microsoft has to pay

Microsoft issues a four year, floating-rate bond for the amount of $100 Million. It pays annually to bondholders. Because Microsoft would prefer to have a

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Microsoft issues a four year, floating rate bond for the amount of $100 Million  It pays annually to bondholders  Because Microsoft would prefer to have a fixed rate payment, it enters into a SWAP with Citibank  Year LIBOR ( ) Fixed Rate payments to Citibank Floating Rate payments from Citibank Net payment to Citibank Payment to bondholders Net payment by Microsoft 1 4 4 2 3 2 5 5 1 4 3 6 6 0 5 4 7 7  1 6 Explain the conditions of this SWAP Which is the final fixed rate that Microsoft has to pay

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LIBOR (%)

Fixed-Rate payments to Citibank

Floating-Rate payments from Citibank

Net payment to Citibank

Payment to bondholders

Net payment by Microsoft