Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OISswap with two years to maturity where you receive 3% and pay the floating reference ratewith principal 1 million. If the payments are made annually with annual compounding, what is the value of the swap

Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OISswap with two years to maturity where you receive 3% and pay the floating reference ratewith principal 1 million. If the payments are made annually with annual compounding, what is the value of the swap

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

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Question

Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OIS
swap with two years to maturity where you receive 3% and pay the floating reference rate
with principal 1 million. If the payments are made annually with annual compounding, what is the value of the swap

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Your client is invested in a registered indexed-linked annuity (RILA). The RILA contains a 7% floor, an 80% participation rate, and an overall cap rate of 10%. Suppose in years one and two, the S&P 500 returns 12% and -10%, respectively. What interest rate would be credited to the RILA during these two years? A) Year 1: 10% / Year 2: -7% B) Year 1: 9.6% / Year 2: -7% C) Year 1: 9.6% / Year 2: -3% D) Year 1: 9.6% / Year 2: -10%
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A security that is selling for $3,000 and promises to pay annual interest or $250 forever would have an annual yield of
Find the present value PV of the annuity account necessary to fund the withdrawal given. (Assume end-of-period withdrawals and compounding at the same intervals as withdrawals. Round your answer to the nearest cent.) $2,500 per quarter for 20 years, if the account earns 4% per year
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You borrow NOK (Norwegian krone) 100m at 10 percent for seven years, and you swap the loan into NZD (New Zealand dollar) at a spot rate of NOK/NZD 4 and the seven-year swap rates of 7 percent (NZD) and 8 percent (NOK). What are the payments on the loan, on the swap, and on the combination of them? Is there a gain if you could have borrowed NZD at 9 percent?
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