On December 31, 2020, SSNIT and SIC (non-life) entered into a six year swap arrangement with first payment to be exchanged on December 31st, 2022 and each December 31st thereafter under the following terms: SIC will pay SSNIT an amount equals to 5% per annum on a notional principal of US$50 million. (FIXED Amount) SSNIT will pay SIC an amount equals to one-year LIBOR +1.25% per annum on a notional amount of US$50 million. (Flexible Amount). On 31stDecember 2022, one-year LIBOR is projected to be 2.75%. What will be the payment flows for the first year, December 31st?

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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. On December 31, 2020, SSNIT and SIC (non-life) entered into a six year swap arrangement with first payment to be exchanged on December 31st, 2022 and each December 31st thereafter under the following terms:

  • SIC will pay SSNIT an amount equals to 5% per annum on a notional principal of US$50 million. (FIXED Amount)
  • SSNIT will pay SIC an amount equals to one-year LIBOR +1.25% per annum on a notional amount of US$50 million. (Flexible Amount).
  • On 31stDecember 2022, one-year LIBOR is projected to be 2.75%.
  1. What will be the payment flows for the first year, December 31st?
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