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Based on the following spot rates: Year Spot Rates 2% 1 2 3% 3 4% 4 5% Paul enters into a four-year interest rate swap
Based on the following spot rates: Year Spot Rates 2% 1 2 3% 3 4% 4 5% Paul enters into a four-year interest rate swap from variable to fixed interest rate with notional amounts of 300000 in year 1; 500000 in year 2; 750000 in year 3; and one million in year 4. The swap has settlement periods of one year. The variable interest rate changes each year and is the one-year spot interest rate at the beginning of the year. Determine the swap rate under this interest rate swap. Select one: O A. 6.0% O B. 5.8% O C.5.4% O D. 6.2% O E.5.6%
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