Bank One Corporation - Page 220

                                        -60-                                          
          Forecasted                                 Present Value                    
          Net Cash                            Floating  Net Cash                      
          Payment Fixed Payment Floating Payment   Flow    Discount  Fixed Payment     Payment    Flow
          Dates   (from FNBC)     (to FNBC)     (to FNBC)  Factor    (from FNBC)     (to FNBC) (to FNBC)
          6/1/1993   $25,278        $20,222      ($5,056)   .9852       $24,903        $19,922  ($4,981)
          12/1/1993    25,417         21,664       (3,753)   .9643        24,509         20,890   (3,619)
          6/1/1994    25,278         25,772          494    .9401        23,762         24,227      465
          12/1/1994    25,417         29,549        4,132    .9131        23,207         26,980    3,773
          6/1/1995    25,278         32,250        6,972    .8845        22,359         28,526    6,167
          12/1/1995    25,417         35,180        9,763    .8545        21,718         30,061    8,343
          Total         —--            ---          ---      ---        140,458        150,606   10,148
                    2.  Floating-Rate Note Method                                     
               An alternative approach finesses the need to forecast                  
          expected cashflows.  It works on the analogy between the swap and           
          a pair of bonds, one of which has a fixed rate and the other of             
          which has a floating rate.  This method relies on the assumption            
          of which the floating-rate bond is worth its face value on the              
          effective date or on any reset date.  Since the market value of             
          the swap is equal to the difference between the value of the                
          floating leg and the value of the fixed leg, and since the value            
          of the floating leg is known, the problem is to determine the               
          value of the fixed leg.  This does not require the use of a                 
          forward curve.                                                              
               The floating-rate note method is useful when (1) the terms             
          of the swap are plain vanilla and (2) the valuation date is a               
          reset date.  In other cases, a correct implementation of the                
          floating-rate note method requires additional steps which are               
          comparable to those employed in the forward rate pricing                    
          approach.  The two approaches yield the same result in all                  
          events.                                                                     







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Last modified: May 25, 2011