More Swaps problems 1. You follow the equity index HSI using an index fund in Hong Kong. You have signed an interest rate swap to exchange the capital gains (losses) from your portfolio, against a sequence of cash flows based on 3-month Libor plus 25bp. The cash flows are exchanged every 90 days. All cash payments occur in Hong Kong dollars. The notional principal is 1 million. a. Draw the cash flow diagram for the first year. b. Let It be the value of the index at time t. Suppose you have the following data: I0=23,850I1=24,000L0=4.5% What is the net amount exchanged at period 1 ? More Swaps problems 1. You follow the equity index HSI using an index fund in Hong Kong. You have signed an interest rate swap to exchange the capital gains (losses) from your portfolio, against a sequence of cash flows based on 3-month Libor plus 25bp. The cash flows are exchanged every 90 days. All cash payments occur in Hong Kong dollars. The notional principal is 1 million. a. Draw the cash flow diagram for the first year. b. Let It be the value of the index at time t. Suppose you have the following data: I0=23,850I1=24,000L0=4.5% What is the net amount exchanged at period 1