Swap contract - derivative question

[thanhcva3]

[question removed by admin] The answer is B but i wonder that why they give us libor on the first settlement date is 5.00% but the answers in the mock exam show that the LIBOR used to calculate is 4.75 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 How can i choose the answer in the real exam? appreciate your helps!

[S2000magician]

As with most floating rate payments, the rate is set in advance , but paid in arrears. Thus, the floating rate is based on the 4.75% LIBOR rate at the beginning of the first period, but is paid at the end of the first period (on the first payment date).

[allalongthewatchtowe]

@S2000magician

As with most floating rate payments,

Hello S2000magician - I am curious - which floating rate payments don’t follow the approach of setting the paymnets in advance and paying in arrears?

Thanks in advance.

[thanhcva3]

@S2000magician

As with most floating rate payments, the rate is set in advance , but paid in arrears. Thus, the floating rate is based on the 4.75% LIBOR rate at the beginning of the first period, but is paid at the end of the first period (on the first payment date).

Tks u so much, i understand now !

[S2000magician]

@allalongthewatchtowe

@S2000magician

As with most floating rate payments,

Hello S2000magician - I am curious - which floating rate payments don’t follow the approach of setting the paymnets in advance and paying in arrears?

Thanks in advance.

None of which I can think; I was hedging in case there were one that eluded me.

Note that for FRAs the floating rate is set in advance and calculated as if it were paid in arrears, but FRAs are settled in advance (at the present value of the net arrears payment).