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An interest rate swap with a notional of $100mln involves payment of 5% per annum fixed (paid semiannually) in exchange for 6-mo LIBORflat. The remaining life is 10 months. Interest is exchanged every six months. Two months ago, LIBOR fixed at 4.5%. The implied forward LIBOR rate for the period 4-10 months from now is 4.85%. Risk-free rates are 4.30% for 4 months and 4.65% for 10 months with continuous compounding. What is the value of this swap to the Receiver of the fixed rate? $256,611 $143,830 $199,777 $318,592

An interest rate swap with a notional of $100mln involves payment of 5% per annum fixed (paid semiannually) in exchange for 6-mo LIBORflat. The remaining life is 10 months. Interest is exchanged every six months. Two months ago, LIBOR fixed at 4.5%. The implied forward LIBOR rate for the period 4-10 months from now is 4.85%. Risk-free rates are 4.30% for 4 months and 4.65% for 10 months with continuous compounding. What is the value of this swap to the Receiver of the fixed rate? $256,611 $143,830 $199,777 $318,592

Essentials Of Investments
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
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An interest rate swap with a notional of $100mln involves payment of 5% per annum fixed (paid semiannually) in exchange for 6-mo LIBORFlat: The remaining life is 10 months. Interest is exchanged every six months. Two months ago, LIBOR fixed at 4.5%. The implied forward LIBOR rate for the period 4-10 months from now is 4.85%. Risk-free rates are 4.30% for 4 months and 4.65% for 10 months with continuous compounding. What is the value of this swap to the Receiver of the fixed rate? $256,611 $143,830 O $199,777 O $318,592
Transcribed Image Text:An interest rate swap with a notional of $100mln involves payment of 5% per annum fixed (paid semiannually) in exchange for 6-mo LIBORFlat: The remaining life is 10 months. Interest is exchanged every six months. Two months ago, LIBOR fixed at 4.5%. The implied forward LIBOR rate for the period 4-10 months from now is 4.85%. Risk-free rates are 4.30% for 4 months and 4.65% for 10 months with continuous compounding. What is the value of this swap to the Receiver of the fixed rate? $256,611 $143,830 O $199,777 O $318,592
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