Interest Rate Swap Illustration - John Zietlow

A swap is an exchange, as the example makes clear: Company X has fixed rate obligation, (wants) swaps for floating-rate: Original borrowing: Pays 5% fixed rate on original note borrowing. Swap: 1. + Pays 5% floating rate to Y (floats with LIBOR) 2. − Receives 5.35% fixed rate from Y. Immediate. Net Cost = 4.65% (versus 5.25% without swap) ................
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