International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

تمرين 11

At the 7-year maturity, U.S. Treasury bonds' yield to maturity is 7.95% p.a. The Second Bank of Chicago states that it will make fixed interest rate payments on dollars at the yield on Treasury bonds plus 55 basis points in exchange for receiving dollar LIBOR, and it will receive fixed interest rate payments on dollars at the yield on Treasury bonds plus 60 basis points in exchange for paying dollar LIBOR. If you enter into an interest rate swap of $10 million with Second Chicago, what will be your cash flows if you are paying the fixed rate and receiving the floating rate