(a) Assume that the following swap instruments are available. The applicable interest rate for the floating side of the swap is 5.02%. Today is March 15, 2002 and there are exactly 90 days between now and the end of the quarter in June.

Required: Calculate the market value of an IRSDB11 swap that has a $1,000,000 face value. If you are paying floating and receiving fixed, does the swap have a positive or negative value to you? Will the swap involve a net cash inflow or outflow for you today? (7 Marks)

1. Detail the various cashflows (and their timing) associated with using an interest rate swap in the trading game. In what situation would you want to enter the swap as a fixed rate payer? (3 Marks)

Instrument Coupon IRSDB03 5.70% IRSDB07 5.95% IRSDB11 6.85% Maturity 15-09-03 15-09-07 15-09-11 Swap rates 5.66/5.70 6.02/6.06 7.00/7.04 Instrument Coupon IRSDB03 5.70% IRSDB07 5.95% IRSDB11 6.85% Maturity 15-09-03 15-09-07 15-09-11 Swap rates 5.66/5.70 6.02/6.06 7.00/7.04