Suppose that oil forward prices for 1 year, 2 years, and 3 years are $109, $128, and $134 per barrel. The 1-year effective annual interest rate is 3.9%, the 2-year interest rate is 4.6%, and the 3-year interest rate is 4.9%. What is the fixed per-barrel price in a 3-year swap that calls for delivery of 4 barrels of oil at the end of the first year, barrels the second year, and 2 barrels the third year?   Answers: a. $111.42   b. $154.43   c $112.66   d.$123.23

Q: Given the following information, what would you expect to be the minimum price at which a 3 month…

A: Storage and Insurance Cost = $0.5 per 100 bushels, per month (Given)For 3 months total Storage and…

Q: Suppose that at the present time, one can enter 5-year swaps that exchange SOFR for 4%. An…

A: Notional principal= 110,000,000*(8%-4%)= 110,000,000*4% = 4400000Present Value can be calculated…

Q: An asset currently costs $432. The risk-free rate in the economy is 2.8% per year. What should be…

A: Current price = p = $432 Risk free rate = r = 2.8% Time = t = 8 / 12 year

Q: You purchased an interest rate swap of which notional principal is $100,000,000 that matures in 10…

A: The minimum amount of payment is computed below:

Q: You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD…

A: The concept of this question revolves around a financial scenario involving borrowing and swapping…

Q: Assume that as of today, the annualized interest rate on a three-year security is 3 percent, while…

A: Interest rate on a three-year = 3% Interest rate on a  two-year  = 2.15%

Q: Consider a 4-year 5% bond swap in euros for 1 million notional value. In other words, there will be…

A: a. Net Present Value (NPV) of the Euro PaymentsPV = C/(1 + r)^nFor each year, the cash flow (\(C\))…

Q: The continuously compounded interest rate is 5% p.a. and the storage cost for copper is 8% p.a. What…

A:

Q: 2. A company can invest funds for five years at LIBOR minus 40 basis points. The five-year swap rate…

A: Swap Rate be the five-year swap rate (4.5%)Spread be the spread over LIBOR (in basis points)

Q: Assume the spot Swiss franc is $0.7015 and the six-month forward rate is $0.6980. What is the Value…

A: Spot Swiss Franc = $ 0.7015Six months Forward rate =Six months Forward rate = $  0.6980nbsp;…

Q: An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest…

A: A swap is a derivative of a finance contract between parties involved in the exchange of cash flows…

Q: Find the lower bound of a European foreign currency put if the spot rate is $3.50, the domestic…

A: Spot Rate = $3.50 Domestic Interest Rate = 8% Foreign Interest Rate = 7% Exercise Price = $3.75

Q: 2. You are given the following table of spot rates: Year Spot rates 1 3.5% 3.8% 4.6% 4 5.1% Ant and…

A: The conceptual formula:

Q: Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5% and a floating rate of…

A: Answer -   Calculation of Amount that will be realized to fixed rate payer in the swap -   The…

Q: An investor enters into a 2-year swap agreement to swap euros at $1.32 per euro. Soon after the swap…

A: Swap is a derivative contract between two parties who agree to exchange financial instruments or…

Q: ibe the cash flows for a 5 year Plain Vanilla Interest Rate Swap. ABC pays 5% fixed, XYZ pays…

A: In swap is a direct agreement between two for exchange of interest payments over a period of time,…

Q: Consider a one-year interest rate swap with semi-annual payments, based on 30/360 day count…

A: Annualized fixed rate refers to the rate of return by considering return on the average basis of a…

Q: Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An…

A: LIBOR can be extended as London Inter-bank Offered Rate. It is the rate at which banks lend money to…

Q: A rice importer is going to sell rice in one year. In order to lock in a fixed selling price, the…

A: Synthetic future contact is a combination of buying and selling a put and call option at same strike…

Q: A company can borrow for five years at 4%. Five-year interest rate swaps are quoted as bid 3.21%,…

A: A company can borrow fixed at 4%. However it wants to achieve a floating rate. This is possible…

Q: of the swap as a percentage of the principal when OIS and LIBOR rates are the same?

A: The worldwide banks that lend to one another in an international interbank market for short-term…

Q: A payment stream consists of a payment of $1600 today, a payment of $2400 in 3 months, and a payment…

A: According to the money's time value theory, cash is worth more now than it will be later. A future…

Q: Assume the spot price of the British pound is currently $1.65. If the risk-free interest rate on…

A: Current spot rate = $1.65Interest rate in US = 4.5%Interest rate in UK = 6.3%

Q: The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of…

A: Present value of annuity is computed as follows:-PV= A*wherePV= Present value of annuityA= periodic…

Q: Let's imagine that the OIS rates for one year and two years are 2% and 4% respectively. Now, let's…

A: Dear student, kindly check the answer in the explanation box below.Explanation:Part 1: Answer:The…

Q: If you are the floating-rate payer in an interest rate swap, paying LIBOR + 40bp with a notional…

A: Given information : Interest rate = LIBOR + 40bp Notional value = $1,000,000 LIBOR rates = 0.72% ,…

Q: A put option is written on €100 with a strike price of $1.00 = €1.00. In one period, there are two…

A: gain on call option if price is $1.15 = €1.00 is 0.15.gain on call option if price is $0.85 = €1.00…

Q: Consider a contract that caps the LIBOR interest rate on $10,000 at 8% per annum (with quarterly…

A: The London Interbank Offer Rate, written as LIBOR, is the global reference rate for unsecured…

Q: You signed a 10-year interest swap (principal USD 1,000,000) with annual payments to pay LIBOR USD…

A: An interest rate swap is a financial contract between two parties that involves the exchange of…

Q: Suppose that a risk-free investment will make three future payments of $100 in one year, $100 in two…

A: Future values in one year, two year and three years are $100 , $100 and $100 respectively.  Rate of…

Q: Assume the spot Swiss franc is $0.7015 and the six-month forward rate is $0.6980. What is the Value…

A: The details related to the options on the Swiss Franc/ $ are given as:Using the information given…

Q: The 9-month LIBOR rate is 5%, and the 6-month LIBOR rate is 4%, on the basis of continuous…

A: We first need to determine the forward rate for 6 months, 3 months from now using the formula below:…

Q: Give typing answer with explanation and conclusion  You entered into a plain vanilla swap a while…

A: To calculate the value of the swap, we need to discount the expected future cash flows of the swap…

Q: Consider a plain vanilla interest-rate swap with an effective date of January 1 of year 1, notional…

A: The current value of a projected sum of money or stream of cash flows with a predetermined rate of…

Q: consider a one-year forward contract on gold. Suppose that it costs $2 per ounce per year to store…

A: Answer information:Step 1:Given :Rate of Interest = R = 7% per annumSpot Price = S(0) = $ 450 per…

Q: A plain vanilla 2-year interest rate swap with annual payments has a notional principal of $1…

A: In an interest rate swap with annual payments, two months have elapsed. The swap needs to be valued…

Q: A credit default swap requires a semi annual payment at the rate of 200 basis points per year. The…

A: Here,InterestRate per year is 200 basis points i.e 2%Principal is 1 billionPrice of cheapest…

Q: What is the continuously compounded zero rate for all maturities? O (a) 12.00% O b) 11.80% O0 11.71%…

A: The question is based on the concept of interest rate swap.  One stream of future interest payments…

Q: Suppose that the spot price of a Canadian dollar is U.S. $0.89 and that the exchange rate has a…

A: Spot price : The spot price is the current market price at which a certain asset can be bought or…

Q: If the spot price for silver is $18.56 per ounce, what should the futures contract price be for a…

A: A derivative is a financial instrument that derived its value from an underlying asset such as…

Q: You signed a 10-year interest swap with annual payments to receive USD fixed and pay USD floating.…

A: Interest rate swap is a contract by which one party agrees to swap the interest rate with another.…

Q: On the London Metals Exchange, the price for copper to be delivered in one year is $5,500 a ton.…

A: It represents both the inflow as well as outflow of the amount from the organisation is termed cash…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.