Question

On January 1, 2020, Iniesta Corporation invested in Kasaba Inc.'s two-year, 10% notes, with interest receivable quarterly. Iniesta entered into a two-year interest rate swap agreement on January 1, 2020 and designated the swap as a fair value hedge. The agreement called Iniesta to make payment based on a 10% fixed interest rate on a notional amount of 200,000 and to receive interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly Floating (LIBOR) settlement rates were 10% at January 1,8% at March 31, and 6% June 30, 2000. The fair values of the investment in notes and swap agreement are as follows:

Answer 1