Question: Suppose that you are fixed payer on a $80M-notional plain-vanilla 4-year interest-rate swap with rate c=3%. In additional you have a short 2-year cap position

Suppose that you are fixed payer on a $80M-notional plain-vanilla 4-year interest-rate swap with rate c=3%. In additional you have a short 2-year cap position on $65M notional with rate K_C=4.2% and a long 3-year floor position on a notional $60M with rate K^P=2.5%.

You took all these positions today, and they settle every 6 months, starting with a first settlement 6 months from now.

What is your net cashflow in 6 months if the current 6-month interest rate is r=2.2%?

Step by Step Solution

★★★★★

3.40 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The cash flows from each position must be identified in order to calculate the net cashflow over the ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The Vintage Restaurant is located on Captiva Island, a resort community near Fort Myers, Florida. The restaurant, which is owned and operated by Karen Payne, just completed its third year of...

A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed rate of 9.75 percent annually on a notional amount of 15,000,000 and receive...

Is there credit risk in an interest rate swap with an intermediary bank serving as the swap dealer? Describe when default losses might arise and which party is at risk. Explain how credit risk can be...

A bank enters into an interest rate swap with a nonfinancial counterparty using bilateral clearing where it is paying a fixed rate of 3% and receiving LIBOR. No collateral is posted and no other...

handwritten calcuations . Discuss the implementation of passive investment strategies. 2. Discuss the implementation of passive investment strategies that employ enhancements. 3. Discuss the...

Is ma cro solve with explaination 4. Explain the key distinctions between Solow Model with Technology and Without Technology (emphasize their predictions for what drives economic growth dynamics and...

CORRECTLY ANSWERSED You and your team work for an educational institution that has 5 campuses and over 40,000 students. Since March 2020, all campuses were closed due to COVID-19 virus presence in...

What factors should be considered in deciding whether the cost of capital for a foreign affiliateshould be higher, lower, or the same as the cost of capital for a comparable domestic operation?...

I need a step by step solutions for the 10 problems in the excel file. The correct answers are provided I only need the solutions steps. Subject is Finance (options valuation) On March 2, a Treasury...

I am wondering if anyone has corrected solutions to fnce 300 assignments 1 2 and 3. I am concered about my answers and would love to compare. Pretty sure on my answers for 1 and 2 mainly interested...

Hi, I have a few questions to ask: 1.Consider the cash flow pattern of the CDS in Exhibit 2. One way to think about a credit default swap is that its cash flows can be replicated with long and short...

Suppose the current one-year interest rate is 6%. One year from now, you believe the economy will start to slow and the one-year interest rate will fall to 5%. In two years, you expect the economy to...

Describe a chromatogram and explain what type of information it contains.

02.04-PR011 Eight equal deposits of $1,000 are made at the end of each year into a fund paying 8%. a. What is the present worth, 1 year before the first deposit? b. What is the future worth,...

Suppose you need 8.5 m of Grade 70 tow chain, which has a diameter of 3/8? and weights 2.16 kg/m, to tow a car. How you calculate the mass of this much chain? Set the math up. But don?t do any of it....

Evaluate, in spherical coordinates, the triple integral of f(p,0,4) = sin o, over the region 0

On September 5, 2009, Ralph offered to purchase a farm that Farms Associates had listed for sale in 2008. At one point during the subsequent negotiations, Farms made a counter offer to Ralph, stating...

(1 point) Use spherical coordinates to evaluate the triple integral e-4+y'+2?) dV, V? + y +z where E is the region bounded by the spheres x? + y? +z? = 4 and x2 + y + z? = 16. Answer =...

Find in terms of x, y, z for the equation of the ellipsoid by using Implicit Function Theorem: ++ = 1 %3D

In the on-the-ground lecture on the pandemic in Bogota, the professor stresses that intelligence agencies confirmed that the United States Group of answer choices this lecture never happened since...

How does the deposit-loan rate spread in the Eurodollar market compare with the deposit-loan rate spread in the domestic U.S. banking system? Why?

The Alpha Company plans to establish a subsidiary in Hungary to manufacture and sell fashion wristwatches. Alpha has total assets of $70 million, of which $45 million is equity financed. The...

American Machine Tools is a Midwestern manufacturer of tool-and-die-making equipment. The company has had an inquiry from a representative of the Moldovan government about the terms of sale for a...

How do they word things when they speak? Are they abrupt, gentle, diplomatic, aggressive, etc?

What do they do that shows them to be engaging in Horseman behaviour?

Which internal parts are opposites or could be used to mitigate each other?