Calculate the first net payment

Assignment Help Financial Management

Reference no: EM132045900

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

Questions Cloud

Calculate the amount of principal repaid in seventh payment : The annual effective interest rate for the loan is 6% Calculate the amount of principal repaid in the seventh payment.

What is warrior profit on the option : They pay a premium of $0.07 per euro, and the MArch 1 spot rate is $0.70. What is Warrior's profit (loss) on the option?

What has been the change in dollar cost of repaying loan : What has been the change in the dollar cost of repaying this loan?

Annual cash flows from fixed-payment annuity : Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 10-year annuity is $1.5 million

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

Who are the stakeholders in the case : What actions should Vinson have taken and when? What prevented her from taking such actions? Who are the stakeholders in the case?

Major influencing body of monetary policy : The Federal Reserve is the major influencing body of monetary policy.

What is sustainable growth rate : Lakesha’s Lounge Furniture Corporation had an ROE of 19.4 percent and a dividend payout ratio of 30 percent. What is the sustainable growth rate?

Prepare the journal entries to record the transactions : Prepare the journal entries to record the transactions of Beach Supplies Ltd up to and including that which took place on 30 June 2017.

User Account

All Pages