Q2.

3. [10 marks] Suppose that the zero-coupon bond prices and oil forward prices for the next four quarters are

	1	2	3	4
oil forward	21	21.1	20.8	20.5
zero-coupon bond	.9852	.9701	.9546	.9388

(a) What is the total present value of the payments due on a strip of long forward positions, one for each quarter?

(b) What is the total present value of a strip of payments of $1 at the end of each of the next four quarters?

(c) What is the 4-quarter oil swap price?

(d) What are the implied forward (annualized) interest rates for the periods from the end of the first quarter to the end of the second quarter, and from the end of the second quarter to the end of the third quarter?

(e) What is the fixed (annualized) rate in a 2-quarter interest rate swap with the first settlement in quarter 2?