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Suppose Smith Corp. and Jones Inc. are two publicly traded companies who entered into an interest rate swap agreement for 5 years. The terms of
Suppose Smith Corp. and Jones Inc. are two publicly traded companies who entered into an interest rate swap agreement for 5 years. The terms of the agreement state that Smith Corp. pays fixed interest to Jones Inc., and Jones pays floating interest to Smith. Suppose that half way through the period of the swap agreement, Smith Corp. goes bankrupt and defaults on its remaining interest payments. Briefly describe the financial damage to Jones Inc.
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