Consider a 5-year $100 fixed notional equity-for-Libor swap, where the stock price at inception was $35. The swap is based on semi-annual payments on both legs, with an Actual/360 convention for the Libor leg. Two years after inception, on the fourth reset date, the stock price is $40. Assume that the number of days in the next period is 183, and the six-month Libor rate on this reset date is 10%. What is the value of the swap from the point of view of the receiver of equity return Zero +14.29 +4.29

Consider a 5-year $100 fixed notional equity-for-Libor swap, where the stock price at inception was $35. The swap is based on semi-annual payments on both legs, with an Actual/360 convention for the Libor leg. Two years after inception, on the fourth reset date, the stock price is $40. Assume that the number of days in the next period is 183, and the six-month Libor rate on this reset date is 10%. What is the value of the swap from the point of view of the receiver of equity return Zero +14.29 +4.29

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

See similar textbooks

Similar questions

Consider the following maturity / yield to maturity for all treasuries. Interest compounds semiannually. Term to Maturity (years) Yield to Maturity or Coupon Rate 0.5 4.50% 1.0 5.00% 1.5 5.50% 2.0 6.00% 2.5 6.50% a) Which, if any, of these securities are zero coupon securities b) Why isn’t the 1.5 year spot rate equal to 5.5% c) Calculate the 1.5 year spot rate.
The spot price of silver is $11.00 per ounce and the futures expires in one year trades for $12.20, what is the implied cost of carry?
Suppose that a commodity’s respective forward prices for 1 year and 2 years are $150 and $158. The 1-year effective annual interest rate is 5.9%, and the 2-year interest rate is 6.6%. You will pay a fixed rate of $153.85906 in a 2-year swap and receive the floating rate. At the time you enter the swap contract, its value to you is... A.$0.0084 B.$–0.0084 C.$0.0051 D.. $–0.0051 E.$000000
Consider an investor who purchases a Treasury inflation-indexed note with an original principal amount of $100,000, a 2.875 percent annual coupon rate (coupon is paid semiannually), and 10 years to maturity. The semiannual inflation rate during the 6 months ending 3 months before the first coupon payment (the 3-month lag is necessary to allow for the release of the official CPI figures) is 0.97 percent. Over the next 6-month period inflation is 0.40 percent. Calculate the adjusted principal amount for the second coupon payment. Round the answer to two decimal places. Your Answer:
A plain vanilla 2-year interest rate swap with annual payments has a notional principal of $1 million. 5 month(s) into the swap, the term structure of interest rates is flat at 4.70%. The first floating-rate payment has already been set to 5.00%. The fixed payments are 5.29%. What is the value of this swap? Please show steps Answer: -8310
A $30,000,000 interest rate swap has a 12-month maturity, and was entered 2 months ago. This means the swap has a remaining life of 10 months. The swap pays interest quarterly, and it stipulates that the fixed rate is 4.5%, while the floating rate is the 3-month LIBOR +1%. Two months ago, when the swap was entered, 3-month LIBOR was 2.9%. The 3-month LIBOR forward rates and continuous time zero-coupon prices are given in a table below. Use the zero coupon prices to discount cash-flows. 3-month LIBOR Forward Rates Term rate 1x4 2.90% 2x5 2.85% 3x6 2.84% 4x7 2.88% 5x8 2.90% 6x9 2.91% 7x10 2.92% 8x11 2.92% 9x12 2.92% Zero-Coupon prices T (month) Price 1 0.9976 2 0.9953 3 0.9929 4 0.9904 5 0.988 6 0.9856 7 0.9831 8 0.9807 9 0.9783 10 0.9761 11 0.9737 12 0.9712 (Important hint: since the swap was entered 2 months ago, and makes quarterly payments, in the remaining 10 months, payments should be expected in 1 month, 4 months, 7 months and 10 months. Discount cash flows accordingly.)…
H3. A 2-year swap based on LIBOR is entered into on 30/6/2010 with current spot 3 month LIBOR at 0.54%. The swap is based on a notional principal of $100m What is the swap rate? Please show proper step by step calculation
Today is January 1. The forward price for contracts maturing on April 1 is $104.4 and on October 1 is $111.6. On April 1, the price of a zero-coupon bond maturing on October 1 is $0.975. Assuming that the underlying interest rate is a continuously compounded interest rate and will not change, the amount of profit that you can make on October 1 by trading one contract each of the near and distant maturity forwards and other securities is: [round to two decimal places]
Suppose that a stock is currently trading at £ 38, and that the current prices for European call and put options on this stock with maturity T 10 years and identical strike price K are equal to £30 and £35, respectively. Assuming that interest is compounded annually at rate 4%, determine the strike price to the nearest pence. Do not type in the pound sign. =
A 2-year swap based on LIBOR is entered into on 30/6/2010 with current spot 3 month LIBOR at 0.54%. The swap is based on a notional principal of $100m What is the swap rate?
Suppose that a bank has agreed to the following terms of an interest rate swap: - The notional principal is CAD 300 million and the remaining life of the swap is 11 months. - The bank pays 8% per annum, and receives three-month LIBOR. - Payments are exchanged every three months. - The swap (fixed) rate is 11% per annum for all maturities. - The three-month LIBOR rate a month ago was 12.5% per annum. All rates are compounded quarterly. Estimate the value of the swap using a) a bond-price valuation method, and b) a FRAS-based method?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS