Anna entered into a four-year interest rate swap three years ago. The notional amount of the swap was 200,000 with one-year settlement periods. Under the agreement, Anna agreed to pay a variable rate equal to the one-year LIBOR rate plus a spread of 245 basis points and receive payments based on a constant annual interest rate of 7.35%. At the end of fourth year, Anna pays a net swap payment of 2,500. Determine the one-year LIBOR rate during the fourth year. A. 6.15% В. 2.45% С. 3.65% D. 11.05% E. 7.35%
Anna entered into a four-year interest rate swap three years ago. The notional amount of the swap was 200,000 with one-year settlement periods. Under the agreement, Anna agreed to pay a variable rate equal to the one-year LIBOR rate plus a spread of 245 basis points and receive payments based on a constant annual interest rate of 7.35%. At the end of fourth year, Anna pays a net swap payment of 2,500. Determine the one-year LIBOR rate during the fourth year. A. 6.15% В. 2.45% С. 3.65% D. 11.05% E. 7.35%
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
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Transcribed Image Text:Question No.9
Anna entered into a four-ycar interest rate swap three years ago. The notional amount of the
swap was 200,000 with one-year settlement periods. Under the agreement, Anna agreed to pay a
variable rate equal to the one-year LIBOR rate plus a spread of 245 basis points and receive
payments based on a constant annual interest rate of 7.35%.
At the end of fourth year, Anna pays a net swap payment of 2,500.
Determine the one-year LIBOR rate during the fourth year.
A. 6.15%
В. 2.45%
С. 3.65%
D. 11.05%
E. 7.35%
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