10. A plain vanilla interest rate swap is written on a notional principal of €100m. The swap pays 3.6% per annum in return for the 3- month LIBOR. Payments are made every 6 months and the swap has 10 months remaining to maturity. The 3-month LIBOR 2 months ago was 3.2% per annum. The swap rate for all maturities is currently 3.8% with continuous compounding. What is the value, in Euros, of the swap to the party paying floating?
10. A plain vanilla interest rate swap is written on a notional principal of €100m. The swap pays 3.6% per annum in return for the 3- month LIBOR. Payments are made every 6 months and the swap has 10 months remaining to maturity. The 3-month LIBOR 2 months ago was 3.2% per annum. The swap rate for all maturities is currently 3.8% with continuous compounding. What is the value, in Euros, of the swap to the party paying floating?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![10. A plain vanilla interest rate swap is written
on a notional principal of €100m. The swap
pays 3.6% per annum in return for the 3-
month LIBOR. Payments are made every 6
months and the swap has 10 months
remaining to maturity. The 3-month LIBOR 2
months ago was 3.2% per annum. The swap
rate for all maturities is currently 3.8% with
continuous compounding. What is the value,
in Euros, of the swap to the party paying
floating?
a. -119,195.16
b. 1,941,376
c. 82,477.03
d. 83,001.04
e. -82,477.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F68afad5e-77ac-4f88-b4d8-44c64a984995%2F0655dd08-7b7b-4cd7-b575-bf237aab383a%2Fwtvp41_processed.jpeg&w=3840&q=75)
Transcribed Image Text:10. A plain vanilla interest rate swap is written
on a notional principal of €100m. The swap
pays 3.6% per annum in return for the 3-
month LIBOR. Payments are made every 6
months and the swap has 10 months
remaining to maturity. The 3-month LIBOR 2
months ago was 3.2% per annum. The swap
rate for all maturities is currently 3.8% with
continuous compounding. What is the value,
in Euros, of the swap to the party paying
floating?
a. -119,195.16
b. 1,941,376
c. 82,477.03
d. 83,001.04
e. -82,477.00
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