Question

In: Finance

Under the terms of an interest rate swap, a financial institution has agreed to pay 10%...

Under the terms of an interest rate swap, a financial institution has agreed to pay 10% per annum and to receive 3-month Libor in return on a notional principal of $100 million with payments being exchanged every 3 months. The swap has a remaining life of 14 months. The average of the bid and offer fixed rates currently being swapped for a 3-months Libor is 12% per annum for all maturities. The 3-month Libor rate one month ago was 11.8% per annum. All rates are compounded quarterly. What is the value of the swap?

Solutions

Expert Solution

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Under the terms of an interest rate swap, a financial institution has agreed to pay 10%...
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...
1.Under the terms of an interest rate swap, a financial institution has agreed to pay 10%...
1.Under the terms of an interest rate swap, a financial institution has agreed to pay 10% per annum and 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 11 months. Suppose the two-, five-, eight-, and eleven-month LIBORs are 11.5%, 11.75%, 12%, and 12.25%, respectively. The three-month LIBOR rate one month ago was 11.8% per annum. All rates are compounded quarterly. What is...
Under the terms of an interest rate swap, a financial institution has agreed to pay 9%...
Under the terms of an interest rate swap, a financial institution has agreed to pay 9% annual rate and to receive three-month LIBOR in return on a notional principal of $100 million with payment being exchanged every three months. The swap has a remaining life of 17 months. The average of the bid and offer fixed rates currently being swapped for three-month LIBOR is 10% for all maturities. The three-month LIBOR rate one month ago was 10.6%. All rates are...
Under the terms of an interest swap, a bank has agreed to pay 10% per annum...
Under the terms of an interest swap, a bank has agreed to pay 10% per annum and 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 11 months. The average of the bid and offer fixed rates currently being swapped for three-month LIBOR is 12% per annum for all maturities. The three-month LIBOR rate one month ago was 11.8% per annum. All rates...
A financial institution has entered into a 10-year currency swap with company Y. Under the terms...
A financial institution has entered into a 10-year currency swap with company Y. Under the terms of the swap, the financial institution receives interest at 3% per annum in Swiss francs and pays interest at 8% per annum in U.S. dollars. Interest payments are exchanged once a year. The principal amounts are 7 million dollars and 10 million francs. Suppose that company Y declares bankruptcy at the end of year 6, when the exchange rate is $0.80 per franc. What...
Under the terms of a currency swap, a company has agreed to receive a fixed interest...
Under the terms of a currency swap, a company has agreed to receive a fixed interest rate of 10% per annum on an American dollar loan with a notional principal of $5 million. In exchange, the company will pay a fixed interest rate of 8% per annum on a Dutch Euro Loan with a notional principal of €2.5 million. Net interest payments are exchanged every six months. The swap has a remaining life of thirteen months. The current interest rates...
A $100 million interest rate swap has a remaining life of 10 months. under the terms...
A $100 million interest rate swap has a remaining life of 10 months. under the terms of the swap, 6-month LIBOR is exchanged for 7% per annum (compounded semiannually). the average of the bid-offer rate being exchanged for 6-month LIBOR in swaps of all maturities is currently 5% per annum with continuous compounding. the 6-month LIBOR rate was 4.6% per annum 2 months ago. What is the current value of the swap to the party paying floating?
A financial institution has entered into a 10-year currency swap with company Y.
A financial institution has entered into a 10-year currency swap with company Y. Under the terms of the swap, the financial institution receives interest at 3% per annum in Swiss francs and pays interest at 8% per annum in U.S. dollars. Interest payments are exchanged once a year. The principal amounts are 7 million dollars and 10 million francs. Suppose that company Y declares bankruptcy at the end of year 6, when the exchange rate is $0.80 per franc. What...
A financial institution can hedge its interest rate risk by:
A financial institution can hedge its interest rate risk by:
In an interest rate swap offered by a bank, Company A could pay 3.5% per annum...
In an interest rate swap offered by a bank, Company A could pay 3.5% per annum and receive six-month LIBOR in return on a notional principal of $100 million with payments being exchanged every six months. The swap has a remaining life of 16 months. Six-month forward LIBOR for all maturities is currently 3.8% per annum. The six-month LIBOR rate two months ago was 3.2% per annum. OIS rates for all maturities are currently 3.0% with continuous compounding. All other...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT