A semi?annual pay interest rate swap where the fixed rate is 5. 00% (with semi?annualcompounding) has a remaining life of nine months. The six?month LIBOR rate observed three months ago was 4. 85% with semi?annual compounding. Today’s three and nine month LIBOR rates are 5. 3% and 5. 8% (continuously compounded) respectively. From this it can be calculated that the forward LIBOR rate for the period between three? and nine?months is 6. 14% with semi?annual compounding. If the swap has a principal value of $15,000,000, what is the value of the swap to the party receiving a fixed rate of interest?
Originally posted 2018-07-23 17:53:17. Republished by Blog Post Promoter