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March 27th, 2013, 10:56 AM   #1
Joined: Mar 2013

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Urgent Please Help! Interest Rate Swap

I have to have this question answered by tomorrow morning and I have really hit a brick wall!
Any help would be very appreciated!

The term structure is flat 5% per annum with continuous compounding. Some time ago the bank entered into a 5-year swap with a principal of $100 million in which every year it pays 12-month LIBOR and recieves 6%. The swap now had two years eight months to run . Four months ago 12-month LIBOR was 4% (with annual compounding).
What is the value of the swap today?
What is the financial instiutions credit exposure on the swap?

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