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 8% (compounded quarterly) per annum and to receive three-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 7 months.

The fixed rates currently being swapped for three-month LIBOR is 10% per annum for all maturities compounded continuously.

The three-month LIBOR rate two months ago was 9.8% per annum (compounded quarterly). What is the value of the swap?

and how me how did they got 0.25

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92864084

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