1. Consider the following interest rate swap scenario: notional =$10MM, actual d
ID: 1170097 • Letter: 1
Question
1. Consider the following interest rate swap scenario: notional =$10MM, actual days in quarter=92, annualized floating rate = 2.5400%, and annualized fixed rate = 2.5400%. What is the floating leg payment?
a.$62,088.89
b.$65,0911.89
c.$64,911.11
d.$127,000
2. If the fixed payment is greater than the floating payment, then
a.The net received by the long interest rate swap position will be position
b.The net received by the long interest rate swap position will be negative
c.The net received by the long interest rate swap position will be zero
d.The net received by the long interest rate swap position will be 100% of the notional principal
Explanation / Answer
Floating Leg Payment = Amont*Rate*Days
= 10000000*2.5400%*92/360
=$64,911.11 i.e. Option c
2. If the fixed payment is greater than the floating payment, then
b. The net received by the long interest rate swap position will be negative
Explanation: Since we are swaping floating with fixed, we are taking long position in fixed. Now, with the higher interest rate in fixed than floating. it is a situation of loss
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