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 3.5%, and 3-month Eurodollar futures maturing on June 30 and September 30 of year 1 are quoted as 96.0 and 95.8. Find the present value of the floating payment in the third quarter. A: $1,042,190 B: $1,055,386 C: $1,067,482 D: $1,075,903

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
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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 3.5%, and 3-month Eurodollar
futures maturing on June 30 and
September 30 of year 1 are quoted as 96.0
and 95.8. Find the present value of the
floating payment in the third quarter.
A: $1,042,190
B: $1,055,386
C: $1,067,482
D: $1,075,903
Transcribed Image Text: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 3.5%, and 3-month Eurodollar futures maturing on June 30 and September 30 of year 1 are quoted as 96.0 and 95.8. Find the present value of the floating payment in the third quarter. A: $1,042,190 B: $1,055,386 C: $1,067,482 D: $1,075,903
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