Party A pays a fixed rate 8 per annum on a semiannual basis

Party A pays a fixed rate 8% per annum on a semiannual basis (180/360), and receives from Party B LIBOR+50 basis points. The current six-month LIBOR rate is 7% per annum. The notional principal is $20M. What is the net swap payment of Party A? $30000 $40000 $50000 $110000

Solution

PAYMENT BY PARTY A = $20,000,000 X 8% X (180/360) = $800,000

PAYMENT BY PARTY B = $20,000,000 X 7.5% X (180/360) = $750,000

SO NET SWAP PAYMENT OF PARTY A = $800000 - $750000 = $50000 ANSWER