Fixed-Rate Exposure Assignment

General Motors. has a floating-rate liability and wants a fixed-rate exposure. They enter into a 2-year quarterly-pay $10 million fixed-for-floating swap as the fixed-rate payer. The counter party is Chase. The fixed rate is 4% and the floating-rate is 90-day LIBOR + 1%, with both calculated based on a 360-day year. Realizations of 90-day LIBOR are:          

Annualized LIBOR:

Current 3.5%

In 1 quarter                  3%

In 2 quarters                3.2%

In 3 quarters                3.8%

In 4 quarters                4%

At swap initiation:

Question 5 options:

Question 6 (2.5 points)

General Motors. has a floating-rate liability and wants a fixed-rate exposure. They enter into a 2-year quarterly-pay $10 million fixed-for-floating swap as the fixed-rate payer. The counter party is Chase. The fixed rate is 4% and the floating-rate is 90-day LIBOR + 1%, with both calculated based on a 360-day year. Realizations of 90-day LIBOR are:

Annualized LIBOR:

Current 3.5%

In 1 quarter                  3%

In 2 quarters                3.2%

In 3 quarters                3.8%

In 4 quarters                4%

The swap payment at the end of the 5^th quarter is:

Question 6 options:

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