What is the value of the same interest rate swap to the party that receives floating and pays fixed?

Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor.
January 4, 2018
What is the NPV for the tool investment?
January 4, 2018

What is the value of the same interest rate swap to the party that receives floating and pays fixed?

A particular interest rate swap involves one party paying a fixed rate of 2.84% on a notional principal of $95 million to a second party and that party paying a floating rate LIBOR on the same notional amount. On the prior payment date, LIBOR was 2.16%. There is 0.34 years until the next payment date and over the remaining life of the swap an additional six payments will be made every six months thereafter. LIBOR rates with maturities corresponding to the seven remaining payment dates are: 2.23%, 2.31%, 2.36%, 2.42%, 2.47%, 2.51%, and 2.56%, respectively. What is the value of the interest rate swap to the party that receives the fixed-rate payment and pays the floating-rate payment? What is the value of the same interest rate swap to the party that receives floating and pays fixed?

 

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