Question 6

The zero-coupon bond yields are 4.0%, 4.5%, 5.0%, and 5.5% in years 1, 2, 3, and 4 respectively. Assume corn forward prices for the proceeding 4 years are $8.00, $8.50, and $9.35, and 9.50, respectively.

What is the market value of this 4-year swap at the time of the initiation?

Question options:

	$8.83
	$8.95
	$38.29
	$0
	$35.35

Question 8

Apple Inc. and Microsoft Inc. decide to swap $1 million loans. Apple Inc. currently pays 12.0% fixed and Microsoft Inc. pays 10.2% on a LIBOR + 0.8% loan. What is the net cash flow for Apple if they swap their fixed loan for a LIBOR + 0.8% loan and LIBOR rises to 11.2%? (Hint: The net swap payment is calculated as: Interest payment received from the swap transaction - the interest payment paid from the swap transaction. The interest payment is calculated as the notional swap principal here is $1 million x the interest rate.)

Question options:

	0
	-$18,000
	$18,000
	+$10,000
	-$10,000