A company enters into a 35 million notional principal, Financial Management

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A company enters into a 35 million notional principal

A company enters into a $35 million notional principal interest rate swap. (Pay fixed, receive floating at LIBOR)

The pay is made every 90 days for one year. (Adjustment factor: 90/360)

[The term structure of LIBOR = 90days: 7%, 180days: 7.25%, 270days : 7.45%, 360days : 7.55%]

(Therefore, fixed rate of swap is 7.3418%)

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%

What is the value of the swap?

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