Use the following information about an interest rate SWAP contract to answer the following question. Assume ½ for the date count fraction. (Do not round intermediate calculations.) If Bank of America wants to make a book P/L of $30,000, what adjustment should it make to its LIBOR floating payments? Counter Parties Notional Principal Fixed Rate payer Fixed Rate Floating Rate Payer Floating Rate Floating Rate Reset Effective date Maturity Date Barclays & Bank of America $8,000,000 Barclays 6% (s.a.) Bank of America LIBOR+???bp (s.a.) 6 months December 21, 2020 December 21, 2023 Term (Years) Pay rate zero Discount Factor Receive rate zero 0.5 5.25% 0.9747 5.33% Discount Factor 0.9744 1 5.78% 0.9454 5.88% 0.9445 1.5 5.97% 0.9167 6.17% 0.9141 2 6.22% 0.8863 6.33% 0.8845 2.5 6.31% 0.8582 6.43% 0.8557 3 6.39% 0.8304 6.51% 0.8276 Provide you answer in basis points, rounded to two decimal points. Recall that 1% = 100 basis points. The following numbers are meant to provide guidance for formatting: 0.5341%=0.005341=53.41bp. The LIBOR adjustment spread that generates a $30,000 P/L for Bank of America is basis points.
Use the following information about an interest rate SWAP contract to answer the following question. Assume ½ for the date count fraction. (Do not round intermediate calculations.) If Bank of America wants to make a book P/L of $30,000, what adjustment should it make to its LIBOR floating payments? Counter Parties Notional Principal Fixed Rate payer Fixed Rate Floating Rate Payer Floating Rate Floating Rate Reset Effective date Maturity Date Barclays & Bank of America $8,000,000 Barclays 6% (s.a.) Bank of America LIBOR+???bp (s.a.) 6 months December 21, 2020 December 21, 2023 Term (Years) Pay rate zero Discount Factor Receive rate zero 0.5 5.25% 0.9747 5.33% Discount Factor 0.9744 1 5.78% 0.9454 5.88% 0.9445 1.5 5.97% 0.9167 6.17% 0.9141 2 6.22% 0.8863 6.33% 0.8845 2.5 6.31% 0.8582 6.43% 0.8557 3 6.39% 0.8304 6.51% 0.8276 Provide you answer in basis points, rounded to two decimal points. Recall that 1% = 100 basis points. The following numbers are meant to provide guidance for formatting: 0.5341%=0.005341=53.41bp. The LIBOR adjustment spread that generates a $30,000 P/L for Bank of America is basis points.
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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Transcribed Image Text:Use the following information about an interest rate SWAP contract to answer the following question. Assume ½ for the date count fraction. (Do not round intermediate calculations.)
If Bank of America wants to make a book P/L of $30,000, what adjustment should it make to its LIBOR floating payments?
Counter Parties
Notional Principal
Fixed Rate payer
Fixed Rate
Floating Rate Payer
Floating Rate
Floating Rate Reset
Effective date
Maturity Date
Barclays & Bank of America
$8,000,000
Barclays
6% (s.a.)
Bank of America
LIBOR+???bp (s.a.)
6 months
December 21, 2020
December 21, 2023
Term (Years) Pay rate zero
Discount Factor
Receive rate zero
0.5
5.25%
0.9747
5.33%
Discount Factor
0.9744
1
5.78%
0.9454
5.88%
0.9445
1.5
5.97%
0.9167
6.17%
0.9141
2
6.22%
0.8863
6.33%
0.8845
2.5
6.31%
0.8582
6.43%
0.8557
3
6.39%
0.8304
6.51%
0.8276
Provide you answer in basis points, rounded to two decimal points. Recall that 1% = 100 basis points. The following numbers are meant to provide guidance for formatting: 0.5341%=0.005341=53.41bp.
The LIBOR adjustment spread that generates a $30,000 P/L for Bank of America is
basis points.
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