Problem 5 Intro A bank agreed to an interest rate swap with a company. Under the terms of the swap, the bank pays 4.5% per annum (compounded semiannually) every six months and receives six-month LIBOR in return, for 10 years on a notional principal of $200 million. Today, when the swap has a remaining life of 2.5 years, the company defaults on the swap and will not make the promised floating payment, nor will it make any other payments in the future. OIS rates are 3.7% for all maturities (with continuous compounding) and LIBOR rates are 5.2% for all maturities (with semiannual compounding). On the last payment date, the 6-month LIBOR forward rate was 4%. Part 1 | Attempt 1/4 for 10 pts. What is the loss to the bank (in absolute terms, $ million)? k+ decimals Submit Problem 5 Intro A bank agreed to an interest rate swap with a company. Under the terms of the swap, the bank pays 4.5% per annum (compounded semiannually) every six months and receives six-month LIBOR in return, for 10 years on a notional principal of $200 million. Today, when the swap has a remaining life of 2.5 years, the company defaults on the swap and will not make the promised floating payment, nor will it make any other payments in the future. OIS rates are 3.7% for all maturities (with continuous compounding) and LIBOR rates are 5.2% for all maturities (with semiannual compounding). On the last payment date, the 6-month LIBOR forward rate was 4%. Part 1 | Attempt 1/4 for 10 pts. What is the loss to the bank (in absolute terms, $ million)? k+ decimals Submit