2. (Valuing Swaps and Swaption) Suppose you observe the following term structure of interest rates (zero coupon bond prices, per $100 dollars of face): Maturity (years) Zero Coupon Bond Prices 0.5 98.5222 1 96.1169 1.5 92.1838 2 87.9913 2.5 84.1973 3 81.0959 (a) What is the three year swap-rate? Assume the swaps pay semi-annually, and quote the swap-rate accordingly (i.e., the annual rate, semi-annually compounding rate). Its a lot easier if you use a spreadshee

Maturity (years) Zero Coupon Bond Prices I 0.5 98.5222 96.1 169 1.5 92.1838 2 87.9913 2.5 84.1973 3 81.0959