03_interestrateswaps [compatibility mode] 19-20
DESCRIPTION
Interest Rate SwapsTRANSCRIPT
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Synthetic Fixed-Rate Loan
1 2 3 4 5 6 7 8Swap Swap Swap Loan Synthetic Loan Synthetic Loan
Effective Dates LIBOR Floating-Rate Fixed-Rate Net Inte rest Received Interest Paid on Payment on Swap Effecti vePayer's Payment* Payer's Payment** by Fixed-Rate Paye r Floating-Rate Loan* and Loan Annualized Rate***
Column 3 − Column 4 Column 6 − Column 53/1/Y1 0.0459/1/Y1 0.050 $225,000 $275,000 -$50,000 $225,000 $275,000 0.0553/1/Y2 0.055 $250,000 $275,000 -$25,000 $250,000 $275,000 0.0559/1/Y2 0.060 $275,000 $275,000 $0 $275,000 $275,000 0.0553/1/Y3 0.065 $300,000 $275,000 $25,000 $300,000 $275,000 0.0559/1/Y3 0.070 $325,000 $275,000 $50,000 $325,000 $275,000 0.0553/1/Y4 $350,000 $275,000 $75,000 $350,000 $275,000 0.055
* (LIBOR/2)($10,000,000)** (.055/2)($10,000,000)*** 2 (Payment on Swap and Loan)/$10,000,000
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A synthetic floating-rate loan is formed by combining a fixed-rate loan with a floating-rate payer’s position.
� Conventional Fixed-Rate Loan
� Swap: Floating-Rate Payer Position
� Swap: Floating-Rate Payer Position
� Synthetic Floating Rate
� Pay Fixed Rate
� Pay Floating Rate
� Receive Fixed Rate
� Pay Floating Rate