(i)Consider a 1.5 year pay fixed swap where the floating rate is received quarterly and the fixed rate is paid semi-annually.What is the fixed rate, expressed as % per year semiannually compounded, of the 0 value swap? Use the following discount factors.

Maturity(T)

Z(T)

0.25

0.9848

0.50

0.9745

0.75

0.9618

1.00

0.9490

1.25

0.9353

1.50

0.9215

1.75

0.9084

2.00

0.8953

(ii)Consider the same swap as in the previous question. Assume the swap notional is 100 million. What is the value of the swap three months after initiation? The current term structure is as given below.

Maturity(T)

Z(T)

0.25

0.9840

0.50

0.9680

0.75

0.9520

1.00

0.9360

1.25

0.9190

1.50

0.9040

1.75

0.8880

2.00

0.8730