A company borrows €15 million from a bank for 1 year at a rate of LIBOR, currently 4.75%, plus 50 basis points. At the same time, the company enters a 1-year, plain vanilla interest rate swap to pay the fixed rate of 5.25% and receive LIBOR. Payments are made on the basis of 180 days in the settlement period. Floating payments are made on the basis of 360 days in a year while fixed payments are made on the basis of 365 days in a year. LIBOR is 5.00% on the first settlement date. The company’s total interest expense for the loan and swap for the first settlement period is closest to:
A. €388,400.
B. €425,900.
C. €444,600.
答案：The company pays the swap dealer the fixed rate of 5.25%, pays the bank Libor of 4.75% (as set at the beginning of the period) plus .50% and receives Libor of 4.75% from the swap dealer.
Fixed payment: (15,000,000)(.0525)(180/365) = 388,356
Floating payment: (15,000,000)(.0475+.005-.0475)(180/360) = 37,500
Net interest expense: 425,856
