You enter into a two-year variable notional swap of equity returns for 6-month Libor with semi-annual payments on both legs. The initial swap notional is $100 million, the Libor rate at inception of the swap is 7.2%, and the realized raw equity returns during the first 6-month period is 6.3%. The first 6-month period has 183 days. The notional principal of the swap entering the second 6-month period is
A) $103.15 million.
B) $103.20 million.
C) $103.66 million.
D) $106.3 million.

Question

You enter into a two-year variable notional swap of equity returns for 6-month Libor with semi-annual payments on both legs. The initial swap notional is $100 million, the Libor rate at inception of the swap is 7.2%, and the realized raw equity returns during the first 6-month period is 6.3%. The first 6-month period has 183 days. The notional principal of the swap entering the second 6-month period is 
A) $103.15 million.
B) $103.20 million.
C) $103.66 million.
D) $106.3 million.

Quizplus · Accepted Answer

The Answer is D

You Enter into a Two-Year Variable Notional Swap of Equity