Under the terms of an interest rate swap a financial, Ask an Expert

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Under the terms of an interest rate swap, a financial institution has agreed to pay 10% per annum and to receive six-month LIBOR in return on a notional principal of $100 million with payments being exchanged every 6 months. The swap has a remaining life of 4 months. The average of the bid and offer fixed rates currently being swapped for 6-month LIBOR is 12% per annum for all maturities. The 6-month LIBOR rate two months ago was 11% per annum. All rates are compounded semiannually. What is the value of the swap?

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Financial Management, Finance

Category:- Financial Management
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