CASE1. Johnny has got a four-year loan for $400,000. The effective annual rate (EAR) of the loan at the end of year 4 is 10%. The interest rates for years 1 to 4 are 8.5%, 9.0%, 9.5% and 10%, respectively. Express your numerical answers in two decimal places.

1)What is Johnnys role in this deal?

Receiver Counter-party Payer Observer None of the options

2)The EAR for the first year is ____%.

3)The EAR for year 2 to year3 is ____%

4)The zero-coupon bond price of year 2 is ____%.

5)The zero-coupon bond price of year 4 is ____%.

6)What is the swap payment of year 3?

7)The swap interest rate is ____.

8)If Johnny pays $340,000 to the lender at the end of year 1, how much does he have to pay the counter-party?

9)How much is the present value of all the interest Johnny has to pay in four years?