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A person enters into a deferred swap. They wants to swap the floating interest rates for a fixed interest rate during the third and fourth
A person enters into a deferred swap. They wants to swap the floating interest rates for a fixed interest rate during the third and fourth years. The notional amount in year 3 is $2000 and the notional amount in year 4 is $2500. The spot rates are as follows:
Time to Maturity | spot rate |
1 | 3.4% |
2 | 4.0% |
3 | 4.3% |
4 | 4.8% |
Determine the swap rate R. Enter your answer as a decimal to four decimal places. e.g. if the swap rate is 5.62%, you would enter 0.0562.
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