Suppose that a fixed-rate borrower (A)has to repay $50 million at an interest rate of 5% p.a., and a floating-rate borrower (B)has to repay $50 million at rates similar to the BBSW.These parties enter into a two-quarter swap arrangement with an agreed principal of $50 million and a swap rate of 5% per annum.At the commencement of each quarter, the BBSW rates are 4% and 5.75% p.a.respectively.
A.Calculate the net settlement payments under the swap.(Use d/diy = 0.25)
B.Show how the fixed-rate borrower becomes a floating-rate payer.
C.Show how the floating-rate borrower becomes a fixed-rate payer.

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The Answer of Suppose that a fixed-rate borrower (A)has to repay $50 million at an interest rate of 5% p.a., and a floating-rate borrower (B)has to repay $50 million at rates similar to the BBSW.These parties enter into a two-quarter swap arrangement with an agreed principal of $50 million and a swap rate of 5% per annum.At the commencement of each quarter, the BBSW rates are 4% and 5.75% p.a.respectively.
A.Calculate the net settlement payments under the swap.(Use d/diy = 0.25)
B.Show how the fixed-rate borrower becomes a floating-rate payer.
C.Show how the floating-rate borrower becomes a fixed-rate payer.

Suppose That a Fixed-Rate Borrower (A)has to Repay $50 Million