Janet enters into an interest rate swap with a notional of $10 million where she receives a fixed rate of 5% and pays a floating rate based on 12-month LIBOR for 5 years Payments on the swap are exchanged annually. Immediately following the third payment, Janet calculates the market value of her swap to be $685,000 If the two-year spot rate is 1.5% at that time, what will Janet receive or pay at the next payment date? A. 240,000 B. 335,000 C. 350,000 D. 359,000 E. 385,000
Janet enters into an interest rate swap with a notional of $10 million where she receives a fixed rate of 5% and pays a floating rate based on 12-month LIBOR for 5 years Payments on the swap are exchanged annually. Immediately following the third payment, Janet calculates the market value of her swap to be $685,000 If the two-year spot rate is 1.5% at that time, what will Janet receive or pay at the next payment date? A. 240,000 B. 335,000 C. 350,000 D. 359,000 E. 385,000
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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Janet enters into an interest rate swap with a notional of $10 million where she receives a fixed
rate of 5% and pays a floating rate based on 12-month LIBOR for 5 years
Payments on the swap are exchanged annually. Immediately following the third payment, Janet
calculates the market value of her swap to be $685,000
If the two-year spot rate is 1.5% at that time, what will Janet receive or pay at the next payment
date?
A. 240,000
B. 335,000
C. 350,000
D. 359,000
E. 385,000
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