Question
The six-month LIBOR rate observed three months ago was 4.85% with semi-annual compounding. Today's three- and nine-month LIBOR rates are 5.3% and 5.8% (continuously compounded),
The six-month LIBOR rate observed three months ago was 4.85% with semi-annual compounding. Today's three- and nine-month LIBOR rates are 5.3% and 5.8% (continuously compounded), respectively.
(a) calculated that the forward LIBOR rate for the period between three and nine months with semi-annul compounding.
(b) A semi-annual pay interest rate swap where the fixed rate is 5% (with semi-annual compounding) has a remaining life of nine months. If the swap has a principal value of $15,000,000, what is the value of the swap to the party receiving a fixed rate of interest?
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Financial Management Principles And Applications
Authors: J William Petty, Sheridan Titman, Arthur J Keown, John D Martin, Peter Martin, Michael Burrow, Hoa Nguyen
6th Edition
1442539178, 9781442539174
