Assume that six months have passed after initiation of an equity swap. Recall your initial swap-fixed-rate was 1.48%. In the beginning of the period, the value of equity (stocks) was $88 whereas the value of equity today is $125. Finally, assume that the notional amount is $5 million. The new discount factors are the following: TTM PVF 0.5yr 0.98 1.5yr 0.95 2.5yr 0.92 3.5yr 0.89 Can you calculate the value of your equity swap today? Hint: Use the formula Value of Equity Swap: (EquityIndexToday/Equity Index Begin Period) - PVF Terminal Year (#Days/360) * SUM of PVFSDuringLifeofSwap - Fixed Rate * Please round your answer to the nearest three decimals if needed. Do not type the $ symbol. 2,375,512.727 margin of error +/- 2%
Assume that six months have passed after initiation of an equity swap. Recall your initial swap-fixed-rate was 1.48%. In the beginning of the period, the value of equity (stocks) was $88 whereas the value of equity today is $125. Finally, assume that the notional amount is $5 million. The new discount factors are the following: TTM PVF 0.5yr 0.98 1.5yr 0.95 2.5yr 0.92 3.5yr 0.89 Can you calculate the value of your equity swap today? Hint: Use the formula Value of Equity Swap: (EquityIndexToday/Equity Index Begin Period) - PVF Terminal Year (#Days/360) * SUM of PVFSDuringLifeofSwap - Fixed Rate * Please round your answer to the nearest three decimals if needed. Do not type the $ symbol. 2,375,512.727 margin of error +/- 2%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that six months have passed after initiation of an equity swap. Recall
your initial swap-fixed-rate was 1.48%. In the beginning of the period, the value
of equity (stocks) was $88 whereas the value of equity today is $125. Finally,
assume that the notional amount is $5 million. The new discount factors are
the following:
TTM
PVF
0.5yr 0.98
1.5yr 0.95
2.5yr
0.92
3.5yr
0.89
Can you calculate the value of your equity swap today?
Hint: Use the formula Value of Equity Swap:
(EquityIndexToday/Equity Index Begin Period) - PVF Terminal Year
(#Days/360) * SUM of PVFSDuringLifeofSwap
-
Fixed Rate *
Please round your answer to the nearest three decimals if needed. Do not
type the $ symbol.
2,375,512.727 margin of error +/- 2%
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