Receives the xed-rate payment and pays oating-rate payment

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Reference no: EM131343145

A particular interest rate swap involves one party paying a xed rate of 2.84% on a notional principal of $95 million to a second party and that party paying a oating rate LIBOR on the same notional amount. On the prior payment date, LIBOR was 2.16%. There is 0.34 years until the next payment date and over the remaining life of the swap an additional six payments will be made every six months thereafter. Continuously com- pounded LIBOR rates with maturities corresponding to the seven remaining payment dates are: 2.23%, 2.31%, 2.36%, 2.42%, 2.47%, 2.51%, and 2.56%, respectively.

(a) What is the value of the interest rate swap to the party that receives the xed-rate payment and pays the oating-rate payment?

(b) What is the value of the same interest rate swap to the party that receives oating and pays xed? Explain.

Reference no: EM131343145

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