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Questions #30-32 are based on the following information: Two years ago Albion Enterprises (AE) entered into a five-year swap agreement. The notional amount was $10

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Questions #30-32 are based on the following information: Two years ago Albion Enterprises (AE) entered into a five-year swap agreement. The notional amount was $10 million, and AE agreed to make five annual payments of $250,000 (2.50%) in exchange for five floating payments. The swap was correctly priced at that time. Two years have passed and the current interest-rate term structure has changed (see the first table below); the present values of AE's swap outflows and expected inflows are no longer equal. Fill in the tables below and use your results to answer the following questions. Tenor/Maturity Spot Rate 1-Year Forward Rate Cash Flow Discount Factor 0.9804 1 Year 2 Years 3 Years 0.0200 0.0250 0.0275 0.0325 not enough info 0.9218 FLOATING Cash Flow Cash Flow Discount Factor Discounted Cash Flow Tenor/Maturity $200,000 0.9804 1 Year 2 Years 3 Years $285,540 0.9218 Present Value = FIXED Cash Flow Cash Flow Discount Factor Discounted Cash Flow Tenor/Maturity 0.9804 1 Year 2 Years 3 Years $237,950 $250,000 0.9218 Present Value = 12 pts 30. What is the present value of the cash flows Albion is scheduled to pay over the next three years? Questions #30-32 are based on the following information: Two years ago Albion Enterprises (AE) entered into a five-year swap agreement. The notional amount was $10 million, and AE agreed to make five annual payments of $250,000 (2.50%) in exchange for five floating payments. The swap was correctly priced at that time. Two years have passed and the current interest-rate term structure has changed (see the first table below); the present values of AE's swap outflows and expected inflows are no longer equal. Fill in the tables below and use your results to answer the following questions. Tenor/Maturity Spot Rate 1-Year Forward Rate Cash Flow Discount Factor 0.9804 1 Year 2 Years 3 Years 0.0200 0.0250 0.0275 0.0325 not enough info 0.9218 FLOATING Cash Flow Cash Flow Discount Factor Discounted Cash Flow Tenor/Maturity $200,000 0.9804 1 Year 2 Years 3 Years $285,540 0.9218 Present Value = FIXED Cash Flow Cash Flow Discount Factor Discounted Cash Flow Tenor/Maturity 0.9804 1 Year 2 Years 3 Years $237,950 $250,000 0.9218 Present Value = 12 pts 30. What is the present value of the cash flows Albion is scheduled to pay over the next three years

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