Question
A company wants a swap where it pays semiannual payments at 6.8% per annum with semiannual compounding on a principal of $9 million for four
A company wants a swap where it pays semiannual payments at 6.8% per annum with semiannual compounding on a principal of $9 million for four years.
The five-year swap rate with semiannual cash flows is 7.2% per annum with semiannual compounding.
The OIS zero curve is flat at 6% per annum with continuous compounding.
How much should a derivatives dealer charge the company?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
