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a. Expected Cashflows
The table below shows the forecasted future cashflows as of
December 1, 1992, on the swap illustrated supra p. 27. The
implied forward rate of 4 percent used for the first floating
payment is specified when the swap is originated. The remaining
implied forward rates are derived from the midmarket swap curve.
The forecasted cashflows for the floating side are calculated by
multiplying the implied forward rate by the notional principal
and then multiplying the product by a ratio that equals the
number of days in the payment period divided by 360.
Number Forecasted
of Forecasted Net Cash
Payment Days in Fixed Implied Forward Floating Flow
Dates Period Payment Rate Payment From (To) FNBC
12/1/1992
6/1/1993 182 $25,278 4.000% $20,222 ($5,056)
12/1/1993 183 25,417 4.262 21,664 (3,753)
6/1/1994 182 25,278 5.098 25,772 494
12/1/1994 183 25,417 5.813 29,549 4,132
6/1/1995 182 25,278 6.379 32,250 6,972
12/1/1995 183 25,417 6.921 35,180 9,763
b. Discounting Expected Cashflows
The table below shows the calculation of the present value
of the forecasted future cashflows of the swap. The second
through fourth columns show the forecasted fixed, floating and
net cashflows on the swap just discussed. The fifth column shows
the discount factors for each cashflow. The total present value
of the swap is $10,148 as of December 1, 1992.
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