Describe the financial effects of the swap

Reference no: EM131993427

Question: In March 2011, we entered into an interest rate swap that expires on March 1, 2016, with a notional amount of $500 million, accounted for as a fair value hedge, that swaps fixed rate interest on our 5.40% Senior Notes due March 1, 2016 for variable interest equal to LIBOR plus 300 basis points. At January 29, 2012, the approximate fair value of this agreement was an asset of $39 million, which is the estimated amount we would have received to settle the agreement

Describe the financial effects of the swap for Home Depot. At what LIBOR rate does Home Depot benefit from the swap? At what LIBOR rate does Home Depot lose from the swap? Discuss what is meant by a "zero-sum game.

Reference no: EM131993427

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