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Suppose the zero coupon bonds with maturity 6, 12, 18, and 24 months (0.5, 1, 1.5, and 2 years) are given by Z(0,0.5) = 0.035x0.5,
Suppose the zero coupon bonds with maturity 6, 12, 18, and 24 months (0.5, 1, 1.5, and 2 years) are given by Z(0,0.5) = 0.035x0.5, Z(0,1) = -0.041x1, Z(0,1,5) = -0,044x 1.5, Z(0, 2) = -0,050x2. Consider a two-year swap with start date To = 0 and payment dates T1 = 0.5, T2 = 1, T3 = 1.5, T4 = 2 and fixed rate K. (1) Compute the value of the fixed leg VFXD (0) at current time 0. (ii) Compute value of the floating leg VFL(0) at current time 0. (iii) Compute the forward swap rate yo [0, 2] from (i) and (ii). Suppose the zero coupon bonds with maturity 6, 12, 18, and 24 months (0.5, 1, 1.5, and 2 years) are given by Z(0,0.5) = 0.035x0.5, Z(0,1) = -0.041x1, Z(0,1,5) = -0,044x 1.5, Z(0, 2) = -0,050x2. Consider a two-year swap with start date To = 0 and payment dates T1 = 0.5, T2 = 1, T3 = 1.5, T4 = 2 and fixed rate K. (1) Compute the value of the fixed leg VFXD (0) at current time 0. (ii) Compute value of the floating leg VFL(0) at current time 0. (iii) Compute the forward swap rate yo [0, 2] from (i) and (ii)
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