Illustrate what is the value of the swap to this financial

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Reference no: EM13123635

In an interest rate swap, a financial institution pays 5% per annum and receives 3-month LIBOR in return on a notional principal of $100 million with payments being exchanged every three months. The swap has a remaining life of 13 months. This implies the next cash flow will be exchanged in 1 month.

The current LIBOR rate is 10% per annum for all maturities. The 3-month LIBOR rate 1 months ago was 8% per annum. All rates are compounded quarterly. Use quarterly compounding.

Question:
What is the value of the swap to this financial institution?

Reference no: EM13123635

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