The three-month libor rate two months ago was 98 per annum


Under the terms of an interest rate swap, a financial institution has agreed to pay 8% (compounded quarterly) per annum and to receive three-month LIBOR in return on a notional principal of $100 million with payments being exchanged every three months. The swap has a remaining life of 7 months. The fixed rates currently being swapped for three-month LIBOR is 10% per annum for all maturities compounded continuously. The three-month LIBOR rate two months ago was 9.8% per annum (compounded quarterly). What is the value of the swap?

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Financial Management: The three-month libor rate two months ago was 98 per annum
Reference No:- TGS02306611

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