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Some time ago a financial institution entered a swap where it agreed to receive 3.8%...

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Accounting

Some time ago a financial institution entered a swap where it agreed to receive 3.8% per annum with semi-annual compounding and pay LIBOR every six months on $100 million. The swap has exactly 13 months left, and the next exchange is in one month. The one-month LIBOR rate is 3.4% per annum with semi-annual compounding, The six-month LIBOR rate that was determined five months ago is 3.2% per annum with semi-annual compounding. Forward LIBOR rates for the 1-to7-month period and the 7-to-13-month period are 3.7% and 3.9% per annum respectively, with continuous compounding. Risk-free zero rates for maturities 1 and 7 months are 3.1% and 3.5% per annum respectively, with continuous compounding. The forward rate for the 7 to 13-month period risk-free rate is 4.2% per annum with continuous compounding. Obtain the value of the swap for the financial institution

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