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Carlton, an AAA rated corporate, enters an interest rate swap on $1,000,000, paying Libor and receiving...

Carlton, an AAA rated corporate, enters an interest rate swap on $1,000,000, paying Libor and receiving a fixed rate of 2.56% annually. The swap is going to last for 4 years. Currently the 4-year Libor is 2.59% on dollars. One year later, Carlton decides to unwind the swap. What is the NPV of the swap if the three-year interest rate(Libor) is 3.02% now? Who pays whom?

Select one:

-$13,006.61; Carlton pays dealer

-$13,006.61; Dealer pays Carlton

$13,006.61; Dealer pays Carlton

-$855; Carlton pays dealer

$855; Dealer pays Carlton

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