Problem:
A company enters into a $35 million notional principal interest rate swap. (Pay fixed, receive floating at LIBOR)
The pay is made every 90days for one year. (Adjustment factor : 90/360)
The term structure of LIBOR = 90days: 7%, 180days: 7.25%, 270days: 7.45%, 360days: 7.55%
Assume that it is now 30 days into the life of the swap.
The new term structure of LIBOR becomes= 90days: 6.8%, 180days: 7.05%, 270days: 7.15%, 360days: 7.2%
Required:
Question: What is the value of the swap?
Note: Please provide step by step solution.