Calculate the equivalent payoff at the one-year point


Problem

A company has agreed that it will pay 3.7% on $50 million for 3 months starting in one year. Suppose rate proves to be 4.2% (with quarterly compounding).

i. Calculate the payoff at the end of 15 months.
ii. Calculate the equivalent payoff at the one-year point.

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Finance Basics: Calculate the equivalent payoff at the one-year point
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