Compute the payments due in the second year on a three-year AMORTIZING swap from company B to company A)Company A and company B both want to borrow £1,000,000 for three years.A wants to borrow floating and B wants to borrow fixed.A and B agree to split the QSD.
A)B pays £402,114.80 to A
B)B pays £100,000 to A
C)B pays £69,788.52 to A
D)None of the above

Question

Compute the payments due in the second year on a three-year AMORTIZING swap from company B to company A)Company A and company B both want to borrow £1,000,000 for three years.A wants to borrow floating and B wants to borrow fixed.A and B agree to split the QSD. 
A)B pays £402,114.80 to A 
B)B pays £100,000 to A 
C)B pays £69,788.52 to A 
D)None of the above

Quizplus · Accepted Answer

In a three-year amortizing swap, the payments are typically split into three equal parts. In the second year, Company B will pay £69,788.52 to Company A based on the agreed split of the QSD. Options A and B are too high, and Option D is not a valid option as there must be a payment in the second year.

Compute the Payments Due in the Second Year on a Three-Year