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An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at 2% is paid and 12-month LIBOR is received. An
An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at 2% is paid and 12-month LIBOR is received. An exchange of payments has just taken place. The one-year, two-year and three-year LIBOR/swap zero rates are 2%, 3% and 5%. All rates are annually compounded. What is the value of the swap as a percentage of the $100 principal value?
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