9.09.2005

Q&A: A bank has made a 10%, 5-year, $100 million fixed-rate loan...

...and wants to swap the fixed annual interest payment into a floating-rate annuity. If the bank could borrow at a fixed rate of 8% for 5 years, what is the notional principal of the swap?

100 * 10% / 8% = $125 mil.

Category: C++ Quant > Derivatives

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