Question
With the Given: Calculate the current value of these holdings, using the following assumptions: Two years ago, it entered into an interest-rate swap agreement, with
With the Given: Calculate the current value of these holdings, using the following assumptions:
Two years ago, it entered into an interest-rate swap agreement, with a $10 million notional amount, 5 years, under which it pays Goldman Trust 4.4% semi-annually, and receives 6-month LIBOR.
3-year interest rate swaps are now being quoted 3.1% (pay fixed, semi-annual), and 5-year interest rate swaps at 3.8% (pay fixed, semi-annual). (Hint: Calculate the dollar-amount of contractual fixed payments to Goldman Trust under the swap agreement.) Note: Assume the floating-rate portion is exactly at market, i.e., no gain or loss in value, and will continue to be regardless of market changes. Thus, only the fixed-rate portion is subject to market risk.
What is the dollar-amount of contractual fixed payments to Goldman trust Under swap agreement?
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