Given a notional principal of 75 million, complete the table. You are the Bank o

ID: 2649188 • Letter: G

Question

Given a notional principal of 75 million, complete the table. You are the Bank of Denver and want to exchange your current 6% fixed interest you recieve from your loans for a floating rate of loans at LIBOR plus 50 basis points in a Vanilla Swap. The Interest rate swap agreement is with the bank of Kansas city ie counter party over the next three years.

Please fill in blanks

floating rate recieved

Category Year 1 Year 2 Year 3 Libor 3.8% 5.1% 5.7%

floating rate recieved

fixed rate paid % swap differential % Net Dollar Amount Recieved

Explanation / Answer

Category

Year 1

Year 2

Year 3

Libor

3.8%

5.1%

5.7%

Floating rate received

4.3%

5.6%

6.7%

Fixed rate paid %

Swap Differential %

-1.7%

-0.4%

+0.7%

Net Dollar Amount Received

(Based on a Notional Value of $75 Million)

-$1,275,000

-$300,000

+$525,000

Loan that bears interest of 0.50% per annum above the London Interbank Offered Rate (LIBOR) is said to be 50 basis points over LIBOR.