Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 7%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 7%. For example, a firm with 9% coupon debt outstanding might like to convert to synthetic floating-rate debt by entering a swap in which it pays LIBOR and receives a fixed rate of 9%. What up-front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $30 million. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) Up-front payment

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other fin…