After World War 1, Spain experienced a shut down in many coal refineries. As a result, companies engaged in certain contracts that allowed them to purchase coal to avoid bankruptcy as much as possible. Consider the following scenario that was undertaken by a Spanish company with Britain after World War 1. The 3-year prepaid swap price for coal is c230.15. The forward price for coal is as follows (with the related spot rates). 1-year 45 5 Forward Price for Coal () Annual Effective Rates (%) 2-year 50 7.5 3-year 55 Given that a swap begins in year 1, what is the 2 year swap price of a forwards swap and what transactions occur during the 3 year period and show that the value of net loans is zero. Repeat the procedure if the annual effective rates/ spot rates are 6% and 7% instead of 5% and 7.5%. After World War 1, Spain experienced a shut down in many coal refineries. As a result, companies engaged in certain contracts that allowed them to purchase coal to avoid bankruptcy as much as possible. Consider the following scenario that was undertaken by a Spanish company with Britain after World War 1. The 3-year prepaid swap price for coal is c230.15. The forward price for coal is as follows (with the related spot rates). 1-year 45 5 Forward Price for Coal () Annual Effective Rates (%) 2-year 50 7.5 3-year 55 Given that a swap begins in year 1, what is the 2 year swap price of a forwards swap and what transactions occur during the 3 year period and show that the value of net loans is zero. Repeat the procedure if the annual effective rates/ spot rates are 6% and 7% instead of 5% and 7.5%