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What is the value of the swap to the financial institution

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Under the terms of an interest rate swap a financial institution has agreed to pay 10% per year and receive 3-month LIBOR in return on a notional principal of $100 million, with payments being exchanged every 3 months. Both rates are with quarterly compounding. The swap has a remaining life of 14 months. The term structure of interest rates is flat at 12% per year (with continuous compounding) for all maturities. The 3-month LIBOR rate one month ago was 11.8% (with quarterly compounding). What is the value of the swap to the financial institution?

Reference no: EM132406987

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