What is the amount of the payment

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Reference no: EM131313089

Orono Bank and the Portland Manufacturing Corp. enter into the following seven-year swap with a notional amount of $75 million and the following terms:

Every year for the next seven years, Orono Bank agrees to pay Portland Manufacturing 7% per year and receive LIBOR from Portland Manufacturing.

a. What type of swap is this?

b. In the first year payments are to be exchanged, suppose that LIBOR is 4%. What is the amount of the payment that the two parties must make to each other?

Reference no: EM131313089

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