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Under the terms of an interest rate swap, PDX Corp has agreed to receive 12% per annum and to pay six-month LIBOR in return on
- Under the terms of an interest rate swap, PDX Corp has agreed to receive 12% per annum and to pay six-month LIBOR in return on a notional principal of $150 million with payments being exchanged every six months. The swap has a remaining life of 10 months. The six-month LIBOR yield curve is downward sloping and rate for next two payment dates are 11% and 13% per annum with continuous compounding. The six-month LIBOR at the last payment date was 11.5% per annum.
(a) What is the value of the fixed-rate bond?
(b) What is the value of the floating-rate bond?
- What is the value of the swap to PDX's counterparty?
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International Financial Reporting Standards An Introduction
Authors: Belverd E. Needles, Marian Powers
3rd Edition
1133187943, 978-1133187943
