prashantsahni

ok….in the ques, there are 3 different situations:
1) fixed rate payment of the swap contract (which the person has to pay to the counterparty): on the basis on 365 days
he pays : 5.25% x 15,000,000 x 180/365
2) receiving a floating rate payment from the counter party @ libor (which in this case is 4.75% at the initiation of the contract): on the basis on 360 days
he receives: 4.75% x 15,000,000 x 180/360
3) pay the interest on the loan @ libor + .5% ( this is a floating rate payment coz libor can change after the setlement date): on the basis on 360 days
he pays: (4.75% + .5%) x 15,000,000 x 180/360
1) is a fixed rate payment
2) and 3) are floating rate
in the answer key the fixed rate payment is divided by 365