Question
Derive the 8-quarter dollar interest swap rate from 8-quarter euro in- terest swap rate (that was obtained from problem 8) by using equation (8.9) of
Derive the 8-quarter dollar interest swap rate from 8-quarter euro in- terest swap rate (that was obtained from problem 8) by using equation (8.9) of the textbook or the formula in page 33 in the slide. Equiv- alently, we can consider the following situation. Suppose we want to swap a euro-denominated coupon bond with a par value of 1 Euro and 0.94572% coupon rate (which is same as the 8-quarter euro swap rate in question 8) for a dollar-denominated coupon bond with $0.9 par value. Then, the question is to find the coupon rate of the Dollar- bond.
Quarter Oil forward price 21 Gas swap price Zero-coupon bond price Euro-denominated zero-coupon bond price Euro forward price (S/E) 6 21.1 20.8 20.5 20.2 20 19.9 19.8 2.2500 2.4236 2.3503 2.2404 2.2326 2.2753 2.2583 2.2044 0.9852 0.970 0.9546 0.9388 0.923 0.9075 0.8919 0.8763 0.9913 0.9825 0.9735 0.9643 0.9551 0.9459 0.9367 0.9274 0.9056 0.9115 0.9178 0.9244 0.9312 0.9381 0.9452 0.9524 Quarter Oil forward price 21 Gas swap price Zero-coupon bond price Euro-denominated zero-coupon bond price Euro forward price (S/E) 6 21.1 20.8 20.5 20.2 20 19.9 19.8 2.2500 2.4236 2.3503 2.2404 2.2326 2.2753 2.2583 2.2044 0.9852 0.970 0.9546 0.9388 0.923 0.9075 0.8919 0.8763 0.9913 0.9825 0.9735 0.9643 0.9551 0.9459 0.9367 0.9274 0.9056 0.9115 0.9178 0.9244 0.9312 0.9381 0.9452 0.9524Step by Step Solution
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