Question
Today, we reached an interest rate swap agreement for 3 years in which we are the payer. In the agreement, interest will be repaid every
Today, we reached an interest rate swap agreement for 3 years in which we are the payer. In the agreement, interest will be repaid every 6 months and the face value of this swap is $100. If the current yield to maturity of a 3-year fixed coupon bond is 2% p.a., and the current 6-month LIBOR rate is 3% p.a.
What is the swap rate and what is current swap value?
Step by Step Solution
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Step: 1
To calculate the swap rate we need to determine the fixed rate that would make the present value of the fixed payments equal to the present value of t...
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Financial Reporting and Analysis
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
7th edition
1259722651, 978-1259722653
