Consider a one-year interest rate swap with semi-annual payments, based on 30/360 day count convention. The term structure of LIBOR spot rates is given as follows: 6-month LIBOR at 7.2%, and 12-month LIBOR at 8.0%. What is the annualized fixed rate on the swap? A. 7.42%. B. 7.93% C. 7.84%. D. 7.56%.

Q: Could you help me with D

A: As per instruction question d will be solved.  The price of the bond is the PV of all future coupons…

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A:

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Q: (d) Compute the price of the bond in (c) using the term structure of the interest rates in point…

A: As per instruction question d will be solved.  The price of the bond is the PV of all future coupons…

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Q: Vijay

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Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.