A swap bank proposes the following interest only swap:
Y will pay the swap bank annual payments on $10,000,000 at a
fixed rate of 9.90 percent. In exchange the swap bank will pay to
company Y interest payments on $10,000,000 at LIBOR – 0.15 percent;
What is the value of this swap to company Y?
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Company Y will save 15 basis points per year on $10,000,000 = |
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Company Y will save 45 basis points per year on $10,000,000 = |
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Company Y will save 5 basis points per year on $10,000,000 = |
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Company Y will only break even on the deal. |
