Question
Our firm is interested in valuing a $5 million, 2-year semi-annual payment swap that we entered 180 days ago at a price of 4.8%, such
Our firm is interested in valuing a $5 million, 2-year semi-annual payment swap that we entered 180 days ago at a price of 4.8%, such that the first payments were just swapped. We are the floating rate payer. Today's LIBOR curve and present value factors are:
180 days 4.0% 0.98722
360 days 4.2% 0.96388
540 days 4.4% 0.95234
720 days 5.0% 0.92173
A. What is the price of a swap today that matches the remaining payments on our swap?
B. Based on the price of the swap today, the value of our existing swap is closest to?
Please list how you approach the problem as well
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