Hello,

I am still a bit confused on the logic behind fixed-for-floating. One of the question was as follows:

**180-Day LIBOR (5%)****360-Day LIBOR (6%)****540-Day LIBOR (6.5%)****720-Day LIBOR (7%)**

After 180 days, they drop to the following:

**180-Day LIBOR (4.5%)****360-Day LIBOR (5%)****540-Day LIBOR (6%)**

When you calculate the value of the swap, we first add up the new discount factors after 180days (0.9780, 0.9524, and 0.9174) and multiply them by the fixed rate side of $0.0331 which is calculated using the old rates. This part I do not understand.

I also do not understand why this is added to the multiplication of $1 * 0.9174 which is the 540-day LIBOR rate. I’ve been solving previous sample questions and they made sense to me up until now. I have never seen this calculation before.

If you can please help me understand, that would be great.

Thank you!