Calculate the value of the swap to the floating rate payer

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Two parties enter a 2-year fixed-for floating interest rate swap with semi-annual payments and notional amount of USD 1 million. Annualized LIBOR rate at initiation of the swap are as follows:

LIBOR            Rate
180-day        5.0%
360-day       6.0%
540-day        6.5%
720-day       7.0%

After 180 days, the swap is marked to market when the 180-day, 360-day, 540-day and 720-day annualized LIBOR rates are 4.5%, 5%, 6% and 6.5% respectively.

Required

Problem 1: Calculate the value of the swap to the floating rate payer, 180 days into the swap.

Reference no: EM132949965

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