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Isabella took a loan of $4,000 today and an additional 54,500 a year later. The I-year spot rate is 3% and the 2-year spot rate
Isabella took a loan of $4,000 today and an additional 54,500 a year later. The I-year spot rate is 3% and the 2-year spot rate is 4%. Under the loan, the interest rate resets at the beginning of each year and is equal to the one-year spot interest rate at the time of the reset Isabella enters into an interest rate swap with a two year term and annual settlement periods under which she will swap the variable interest rate for a fixed interest rate. Determine the level swap interest rate R. Ponible Answers A 3.5% 33.6296 C 3.989 D4.04 4.35
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