Q1

Consider a plain vanilla interest-rate swap with an effective date of January 1 of year 1, notional amount of $100 million and quarterly payments. The reference rate is 3-month LIBOR. On January 1, the 3-month LIBOR is 3%, and 3-month Eurodollar futures maturing on June 30 and September 30 of year 1 are quoted as 96.5 and 96.2. Find the present value of the floating payment in the third quarter.

Q2

Today is January 1. You are long a quarterly swap with a notional amount of $100 million that will mature in six months (i.e. on June 30). The reference rate is 3-month LIBOR. Todays 3-month LIBOR is 3%, and 3-month Eurodollar futures maturing on June 30 and September 30 are quoted as 96.5 and 96.2. The swap rate is 3.7%. What is the value of this swap to you?