Calculate the first net payment

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Consider a $30 million notional amount interest rate swap with a fixed rate of 7%, paid quarterly on a 90/360 day count convention. The first floating payment is set at 7.2%.

Calculate the first net payment and identify whether the party paying fixed or the party paying floating makes the payment.

Since one party knows in advance that they will be making a payment 90 from now (effectively a guaranteed loss at the 90-day mark, since swap contracts do not involve up front cash flows), why would they enter this swap contract?

(No Excel. Please show every step in detail)

Reference no: EM132045900

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