consider pricing a one-year swap on December 11, Year 1, given the following yield information pertaining to floating rates:

 

We would like to use this information to derive the fixed swap rate. The general expression for the swap rate is

 

a) In order to compute the swap rate, what would we input for , , , , ? (1 mark)

b) Based on your input for , , , , what is the value of the swap rate? (2 marks)

c) If you expect the floating rates to increase, would paying a fixed swap rate be advantageous or disadvantageous to you? Why? (2 marks)