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New Ventures Limited issued floating-rate notes with a one-year maturity, an interest rate of Jibar...

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Accounting

New Ventures Limited issued floating-rate notes with a one-year maturity, an interest rate of Jibar plus 125 basis points, and total face value of R500 million. The company predicts that interest rates will go up and wants to protect itself by entering into an interest rate swap. A dealer provides a quote on a swap where the company will pay a fixed rate 6.5% and receive Jibar. interest is paid quarterly, and the current Jibar is 5%. All payments will be made on the basis of 90/360. 3.1 If the company enters a swap agreement to pay a fixed rate of 6.5% and receive a floating rate. Calculate the overall net payment (including the loan) by the company.

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