Bank A enters into a $1,000,000 quarterly-pay plain vanilla interest rate swap as based on a 360-day year. The floating-rate payer agrees to pay 90-day LIBOR)plus a 1% margin; 90-day LIBOR is currently 4%. 90-day LIBOR rates are:  4.5% 90 days from no

In a plain vanilla interest rate swap, Bank A pays a fixed rate and receives a floating rate based on LIBOR. In this case, Bank A is the floating-rate payer, which means they will pay the floating rate for the specified periods calculated based on 90-day LIBOR + 1% margin, and they will receive a fixed rate that is determined at the beginning of the swap. However, since no fixed rate was provided in your statement, we'll focus solely on the payments made by Bank A, which are based on the future LIBOR rates plus 1%. The following calculations will detail how much Bank A pays at the specified intervals. ### Given: - Notional amount: $1,000,000 - Current 90-day LIBOR: 4.0% (for calculation of first payment) - Future 90-day LIBOR rates: - 4.5% for 90 days - 5.0% for 180 days - 5.5% for 270 days - 6.0% for 360 days - Margin: 1% ### Payment calculations: The floating payment in each period is calculated as follows: \[ \text{Payment} = \left(\text{LIBOR} + \text{Margin}\right) \times \frac{\text{Notional}}{\text{Number of Periods in a Year}} \] Assuming 360 days in a year, we can use 4 periods and adjust for the notional value: - Number of Periods in a Year = 360 days / 90 days = 4 #### 1. **Payment at 90 Days** 90-day LIBOR forecast = 4.5%, Margin = 1% \[ \text{Payment} = (4.5\% + 1\%) \times \frac{\$1,000,000}{4} \] \[ = 5.5\% \times \frac{\$1,000,000}{4} = 0.055 \times 250,000 = \$13,750 \] #### 2. **Payment at 270 Days** 90-day LIBOR forecast = 5.5%, Margin = 1% \[ \text{Payment} = (5.5\% + 1\%) \times \frac{\$1,000,000}{4} \] \[ = 6.5\% \times \frac{\$1,000,000}{4} = 0.065 \times 250,000 = \$16,250 \] #### 3. **Payment at 360 Days** 90-day LIBOR forecast = 6.0%, Margin = 1% \[ \text{Payment} = (6.0\% + 1\%) \times \frac{\$1,000,000}{4} \] \[ = 7.0\% \times \frac{\$1,000,000}{4} = 0.070 \times 250,000 = \$17,500 \] ### Summary of Payments: - **Payment at 90 Days:** $13,750 - **Payment at 270 Days:** $16,250 - **Payment at 360 Days:** $17,500 This is how much Bank A pays at each of the specified intervals based on the floating LIBOR rates provided.