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7. Consider a semi-annually paid interest rate swap, maturing in 1 year. The notional value is 100,000. The floating rate is 6M LIBOR +3%. In

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7. Consider a semi-annually paid interest rate swap, maturing in 1 year. The notional value is 100,000. The floating rate is 6M LIBOR +3%. In the market, the 6M LIBOR is 3%; and its forward maturing in 6-month is 1%. If the swap rate is 5%, is this a fair price? Why? [8]

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