Spot % Q2) (10 Points) Assume spots rates for the next 10 years are: Year Spot % Year 1 1.50% 6 2.75% 2 1.75% 7 3.00% 3 2.00% 8 3.25% 4 2.25% 9 3.50% 5 2.50% 10 3.75% a) Compute the fixed rate on a 10 year, $100M amortizing swap. $20M of principal is paid down at the end of years 2, 4, 6, 8 and 10. Assume annual payments and discrete compounding. b) If rates go up immediately by 50 basis points after the Swap is put in place compute its change in market value. Assume you are receiving Float and paying Fixed. c) If LIBOR rates for years 1-5 are equal to the initially projected forward rates and LIBOR for years 6-10 are 50, 20, 30, 25 and 10 basis points, above the initially projected forward rates what are your net cash flow payments/receipts in years 6 and 10? Spot % Q2) (10 Points) Assume spots rates for the next 10 years are: Year Spot % Year 1 1.50% 6 2.75% 2 1.75% 7 3.00% 3 2.00% 8 3.25% 4 2.25% 9 3.50% 5 2.50% 10 3.75% a) Compute the fixed rate on a 10 year, $100M amortizing swap. $20M of principal is paid down at the end of years 2, 4, 6, 8 and 10. Assume annual payments and discrete compounding. b) If rates go up immediately by 50 basis points after the Swap is put in place compute its change in market value. Assume you are receiving Float and paying Fixed. c) If LIBOR rates for years 1-5 are equal to the initially projected forward rates and LIBOR for years 6-10 are 50, 20, 30, 25 and 10 basis points, above the initially projected forward rates what are your net cash flow payments/receipts in years 6 and 10