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Under the terms of an interest rate swap, a financial institution has agreed to receive 12% (compounded quarterly ) per annum and to pay three-month LIBOR in return on a national principle of $100 million with payment being exchanged every three months. The swap has remaining life of 7 months. The LIBOR rate is 11% per annum far all maturities compounded continuously. The three month LIBOR rate two ago was 10% per annum (compounded quarterly). What is the value of the swap.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92320496

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