Party A enters into a plain vanilla 1-year interest rate swap agreement with Bank B in which he will make fixed-rate payments in exchange for receiving floating-rate payments based on LIBOR plus 100 basis points. Assume that payments are made quarterly in arrears based on a 360-day year. The fixed rate on the swap is 6.5 percent. The current interest rates on 90, 180, 270, and 360-day LIBOR are 5.2 percent, 5.5 percent, 5.8 percent, and 6.0 percent, respectively. If the notional principal is $100 million, what will Party A’s net cash flow at the end of the first quarter equal
A．
| A. - $675000. |
B．
| B. - $75000. |
C．
| C. + $75000. |
参考答案：B
解析：Party A wants to swap his fixed-rate payment, so he will pay the fixed payments in the swap and receive the floating rate payments based on LIBOR plus 100bp. First calculate the first fixed rate payment as: $100000000 × [0.065 × (90/360) ] = $1625000. Next calculate the first floating-rate payment as: $100000000 × [ (0.052 + 0.01 ) × (90/360) ] = $1550000. Since Party A is paying fixed and receiving floating, the net payment from Party A is $1625000 - $1550000 = $75000 (a cash outflow). Notice you need only 90-day LIBOR since payments were being calculated quarterly and the question asked for the first net payment.