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What is the present value of the swap

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In an interest rate swap, a financial institution has agreed to pay 3.5% per annum and to receive three-month LIBOR in return on a notional principal of $100 million, with payments exchanged every three months.

There are 4 swap cash flows: in 3 months, 6 months, 9 months and 12 months.

Today's 3M Libor is 4% with quarterly compounding. Three month forward LIBOR for all maturities is currently 4% with quarterly compounding. OIS rates (zero rates used for computing discount factors) for all maturities are currently 1.0% with continuous compounding.

What is the present value of the swap?

Reference no: EM133076601

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