Anna entered into a four-year interest rate swap three years ago. The notional amount of the swap was 200,000 with one-year settlement periods. Under the agreement, Anna agreed to pay a variable rate equal to the one-year LIBOR rate plus a spread of 245 basis points and receive payments based on a constant annual interest rate of 7.35%. At the end of fourth year, Anna pays a net swap payment of 2,500. Determine the one-year LIBOR rate during the fourth year. A. 6.15% В. 2.45% С. 3.65% D. 11.05% E. 7.35%

Anna entered into a four-year interest rate swap three years ago. The notional amount of the swap was 200,000 with one-year settlement periods. Under the agreement, Anna agreed to pay a variable rate equal to the one-year LIBOR rate plus a spread of 245 basis points and receive payments based on a constant annual interest rate of 7.35%. At the end of fourth year, Anna pays a net swap payment of 2,500. Determine the one-year LIBOR rate during the fourth year. A. 6.15% В. 2.45% С. 3.65% D. 11.05% E. 7.35%

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 26E

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Styles c)A swap agreement calls for Grand Industries to pay interest annually based on a rate of 1% over the one year T bill rate, currently 6%. In return, Grand receives interest at a rate of 6% on a fixed rate basis. The notional principal for the swap is $ 500000| What is Grand's net interest for the year after the agreement?
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