Exhibit 23.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The Skalmory Corporation has entered into a 3-year interest rate swap, with semiannual settlement, to pay a fixed rate of 7.5% per year and receive 6-month LIBOR. The notional principal is $10,000,000.
-Refer to Exhibit 23.9. What is the market value of the swap to the Skalmory Corporation?
A)-$9,000,000
B)-$1,804,000
C)-$87,654
D)$91,830
E)$7,620,000

Question

Quizplus · Accepted Answer

The correct answer is D. The market value of the swap is $91,830. This is because the present value of the fixed rate payments is $9,183,000 and the present value of the floating rate payments is $9,091,170. The difference between these two values is the market value of the swap.

Exhibit 23.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)