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Let's suppose that oil forward prices for 1 year, 2 years, and 3 years are $40, $41, and $42. The 1-year, 2-year, and 3-year effective
Let's suppose that oil forward prices for 1 year, 2 years, and 3 years are $40, $41, and $42. The 1-year, 2-year, and 3-year effective annual interest rates are 2.0%, 2.5%, and 3.0%, respectively.
(a) What is the 3-year swap price?
(b) What is the price of a 2-year swap beginning in 1 year? (That is, the first swap settlement will be in 2 years and the second in 3 years.)
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