SWAP CANCELLATION QUESTION You purchased an interest rate swap of which notional principal is $100,000,000 that matures in 10 years (Annual settlement, annuity in arrears) 3 years ago. Fixed rate was set to be 4% and the floating rate was set to be LIBOR. Today, the benchmark 1-year LIBOR is 2.5% and the relevant 7-year yield is 2%. If you want to exit this swap, you have to convince the swap seller (the other party) by offering some payment. What is the minimum amount of such payment you need to offer to exit this swap?
SWAP CANCELLATION QUESTION You purchased an interest rate swap of which notional principal is $100,000,000 that matures in 10 years (Annual settlement, annuity in arrears) 3 years ago. Fixed rate was set to be 4% and the floating rate was set to be LIBOR. Today, the benchmark 1-year LIBOR is 2.5% and the relevant 7-year yield is 2%. If you want to exit this swap, you have to convince the swap seller (the other party) by offering some payment. What is the minimum amount of such payment you need to offer to exit this swap?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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SWAP CANCELLATION QUESTION
You purchased an interest rate swap of which notional principal is $100,000,000 that matures in 10 years (Annual settlement,
Today, the benchmark 1-year LIBOR is 2.5% and the relevant 7-year yield is 2%. If you want to exit this swap, you have to convince the swap seller (the other party) by offering some payment.
What is the minimum amount of such payment you need to offer to exit this swap?
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