Question
An investor currently holds $10M of fixed rate corporate bonds with a coupon rate of 4.83% (paid semi-annually). The investor takes the fixed-payer position in
An investor currently holds $10M of fixed rate corporate bonds with a coupon rate of 4.83% (paid semi-annually). The investor takes the fixed-payer position in an interest rate swap with a swap rate of 1.09%/LIBOR and notional principal of $10M.
a. What is the investors net cashflow on a future date (including the swap and current fixed-rate investment) if the relevant LIBOR rate is 1.75%?
b. What is the investors net cashflow on a future date (including the swap and current fixed-rate investment) if the relevant LIBOR rate is 0.75%?
c. What is the synthetic rate achieved with the net investment?
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Swing Trading With Options Swing Trading With Options
Authors: Carl Swing
1st Edition
169258023X, 978-1692580230
