The current libor rate is 7 per annum for all maturities., Ask an Expert

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In an interest rate swap, a financial institution pays 4% per annum and receives 3-month LIBOR in return on a notional principal of $100 million with payments being exchanged every three months. The swap has a remaining life of 13 months. This implies the next cash flow will be exchanged in 1 month.

The current LIBOR rate is 7% per annum for all maturities. The 3-month LIBOR rate 2 months ago was 6% per annum.

All rates are compounded quarterly. Use quarterly compounding.

What is the value of the swap to this financial institution?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M940833

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