Deutsche Bank is into a 5-year fixed-for-LIBOR interest rate swap with Volkswagen on a notional...
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Deutsche Bank is into a 5-year fixed-for-LIBOR interest rate swap with Volkswagen on a notional amount of 10 million with semi-annual payments/ compounding. The bank pays LIBOR for 10% annually. Volkswagen defaults on the sixth payment, when annual LIBOR was 8% with a flat yield curve. How much will Deutsche lose, if the six-month LIBOR halfway through Year 3 was 9% annually?
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