step example, follows: A municipal issuer and counterparty agree to a $100 mil lion “plain vanilla” swap starting in January 2006 that calls for a 3-year maturity with the municipal issuer paying the Swap Rate (fixed rate) to the counterparty and the counter- party paying 6-month LIBOR (floating rate) to the issuer. Using the above formula, the Swap Rate can be calculated by using the 6-month LIBOR “futures” rate to estimate the present value of the floating component payments. Pay ments are assumed to be made on a semi-annual basis (., 180-day periods)
