Question
Maturity Bid (%) Offer (%) Swap Rate (%) 2 years 2.55 2.58 2.565 3 years 2.97 3.00 2.985 4 years 3.15 3.19 3.170 5 years
Maturity | Bid (%) | Offer (%) | Swap Rate (%) |
2 years | 2.55 | 2.58 | 2.565 |
3 years | 2.97 | 3.00 | 2.985 |
4 years | 3.15 | 3.19 | 3.170 |
5 years | 3.26 | 3.30 | 3.280 |
7 years | 3.40 | 3.44 | 3.420 |
10 years | 3.48 | 3.52 | 3.500 |
Q1: Company A has been offered the rates shown in Table 7.3. It can borrow for three years at 3.45%. What floating rate can it swap this fixed rate into?
Q2: Company B has been offered the rates shown in Table 7.3. It can borrow for 5 years at LIBOR plus 75 basis points. What fixed rate can it swap this floating rate into?
Q3: Company X has been offered the rates shown in Table 7.3. It can invest for four years at 2.8%. What floating rate can it swap this fixed rate into?
Q4: Company Y has been offered the rates shown in Table 7.3. It is confident that it will be able to invest at LIBOR minus 50 basis points for the next ten years. What fixed rate can it swap this floating rate into?
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