Determine the fixed rate on the swap

Reference no: EM131481953

Question: A corporation enters into a $X million notional principal interest rate swap. The swap calls for the corporation to pay a fixed rate and receive a floating rate of LIBOR. The payment will be made every 90 days for one year and will be based on the adjustment factor 90/360. The term structure of LIBOR when the swap is initiated is as follows: 90 days, 7.2%; 180 days, 7.40%; 270 days,7.6%; 360 days, 7.80%.

a. Determine the fixed rate on the swap.

b. Calculate the first payment on the swap.

Reference no: EM131481953

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