Please use risk-free rate= 2.53%

Swaptions a) Use the Smith (1991) multiplier applied to the Black (1976) method to calculate the price of a Payer Swaption given the following information A 2-year Payer Swaption written on a 4-year Swap Semi-annual composition Forward rate of the swap starting in 2 years and ending in 6 years: 8.9% Exercise rate: 7.2% Risk-free rate: 2.93%. Forward sawp volatility per year: 27%. Swap principal: S$2,500,000 b) Could a similar method be used to calculate a call on an electricity swap? Explain