What is the current value of this swap to your company

Reference no: EM13255862

In an existing (not new) interest rate swap, your company receives 5.00% (fixed) per annum and pays 3 month LIBOR in return on a notional principal of $100 million with payments being exchanged every 3 months. The swap has a remaining life of 13 months. This implies the next cash flow will be exchanged in 1 month and the last exchange occurred 2 months ago.

The current LIBOR rates for different maturities are given as follows.

Maturity LIBOR (with continuous compounding)
1 month 3.00%
4 months 3.25%
7 months 3.50%
10 months 3.75%
12 months 4.00%

On the other hand, the 3 month LIBOR rate 2 months ago (when the last cash exchange occurred) was 4.00% per annum with quarterly compounding.

What is the current value of this swap to your company?

Reference no: EM13255862

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