Question

However, since the delivery is in January 2021, there is a risk that inte rest rates move to where the lease deal is no longer profitable to BA. To protect

itself against interest rate risk, BA has added a clause around pegging the LRF to swap rates. BA proposes to adjust monthly lease payments by $100/bp for each basis point change in the current 7-year swap vs. the rate at time of delivery. Currently, the 7-year swap rate is 2% 5. Assume in January 2021, the 7-year swap is 2.5%. What will be the monthly lease payments?

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