10. A plain vanilla interest rate swap is written on a notional principal of €100m. The swap pays 3.6% per annum in return for the 3-month LIBOR. Payments are made every 6 months and the swap has 10 months remaining to maturity. The 3-month LIBOR 2 months ago was 3.2% per annum. The swap rate for all maturities is currently 3.8% with continuous compounding. What is the value, in Euros, of the swap to the party paying floating? a. -119,195.16 b. 1,941,376 c. 82,477.03 d. 83,001.04 e. -82,477.00

10. A plain vanilla interest rate swap is written on a notional principal of €100m. The swap pays 3.6% per annum in return for the 3-month LIBOR. Payments are made every 6 months and the swap has 10 months remaining to maturity. The 3-month LIBOR 2 months ago was 3.2% per annum. The swap rate for all maturities is currently 3.8% with continuous compounding. What is the value, in Euros, of the swap to the party paying floating? a. -119,195.16 b. 1,941,376 c. 82,477.03 d. 83,001.04 e. -82,477.00

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A 139.
Consider a $15 million interest-rate swap in which cash flows based on a fixed rate of 5% (with semi-annual compounding) are exchanged for 6-month LIBOR. The swap has a remaining life of 9 months. The 6-month LIBOR that was observed three months ago was 4.85% (with semi-annual compounding). The forward LIBOR for the period between 3 months and 9 months (from today) is 6.14% (with semi-annual compounding). The risk-free rates for 3 months and 9 months are 5.3% and 5.8%, respectively, with continuous compounding. Calculate the value of the swap to the party receiving the fixed rate.
Give typing answer with explanation and conclusion You entered into a plain vanilla swap a while back where you pay 10% per annum with quarterly compounding on a notional principal of $100,000,000 with payments made quarterly. In exchange, you receive a payment of LIBOR. Your swap has 0.7 years left until its termination date. The LIBOR rate was 14.5% per annum with quarterly compounding when you made your last payment. If today’s discount rates are per annum with continuous compounding as followed what is the value of your position? Years Rate 0.2 7.25% 0.45 7.30% 0.7 7.35%
Consider a plain vanilla interest-rate swap with an effective date of January 1 of year 1, notional amount of $100 million and quarterly payments. The reference rate is 3- month LIBOR. On January 1, the 3-month LIBOR is 3.0%, and 3-month Eurodollar futures maturing on June 30 and September 30 of year 1 are quoted as 96.6 and 96.2. Find the present value of the floating payment in the third quarter. $899,104 $915,322 $931,067 $946,482
A plain vanilla 2-year interest rate swap with annual payments has a notional principal of $1 million. 4 month(s) into the swap, the term structure of interest rates is flat at 4.87%. The first floating-rate payment has already been set to 4.60%. The fixed payments are 4.99%. What is the value of this swap? Round to the nearest dollar.
You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD (New Zealand dollar) at a spot rate of NOK/NZD 4 and the seven-year swap rates of 7 percent (NZD) and 8 percent (NOK). What are the payments on the loan, on the swap, and on the combination of them? Is there a gain if you could have borrowed NZD at 9 percent?
Use the following information for questions 12-15: Under the terms of an interest rate swap, a financial institution has agreed to pay 10% per annum and to receive the 3-month LIBOR in return on a notional principal of $50 million with payments exchanged every 3 months. The swap has a remaining life of 14 months. The current rate being swapped for 3- month LIBOR is 11.8% per annum for all maturities. The 3-month LIBOR rate 1 month ago was 12% per annum. All rates are compounded quarterly.
Consider the following information for an exchange rate: • Current spot rate is USD 1.70 for 1 GBP • Risk-free US rate of interest is 6% p.a. compounded continuously. • Risk-free UK rate of interest is 8% p.a. compounded continuously. • Volatility (o) of the currency returns is 20% p.a. • Maturity of the option is 9 months. • Strike rate of the option is USD 1.50 for 1 GBP • The currency options are European in nature •N How much does it cost to hold (i.e., buy) a call-USD option? Use the Garman Kohlhagen model.
Assume oat forward prices over the next 3 years are $2.30, $2.40, and $2.33, respectively. Effective annual interest rates over the same period are 5.5%, 5.8%, and 6.1%. What is the 3-year swap price if the delivery in year 1 is 100,000 bushels, the delivery in year 2 is 125,000 bushels and the delivery in year 3 is 175,000 bushels?
3
9
You signed a 10-year interest swap with annual payments to receive USD fixed and pay USD floating. The quote was 2.5-2.7% against LIBOR flat. The principal is USD 100,000. What is the value of the swap 3 years later if the USD interest rate is 5%? Round to the nearest US dollar.

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