You are given the following spot rates Time Spot Rate 3.0% 3.5% 3 4.0% 4. 4.5% Bill enters into a four-vear interest rate swap where the floating rate resets annually. The notional amount of the swap is 1000 the first year, 1500 the second year, 2500 the third year, and 3000 the fourth year. Determine the swap interest rate. Possible Answers 4.3% 4.5% 4.7 4.8% 4.9%

You are given the following spot rates Time Spot Rate 3.0% 3.5% 3 4.0% 4. 4.5% Bill enters into a four-vear interest rate swap where the floating rate resets annually. The notional amount of the swap is 1000 the first year, 1500 the second year, 2500 the third year, and 3000 the fourth year. Determine the swap interest rate. Possible Answers 4.3% 4.5% 4.7 4.8% 4.9%

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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D3) Finance The current SOFRs for 3-month, 6-month and 9-month are 10.96%, 11.25% and 11.45%, respectively. What is annualized swap rate for the 9-month interest rate swap? %
-A1-year-deferred, 2-year interest rate swap is based on the spot rates in the following table: 4 Term (in years) Spot rate A) 0.043 (5 1 0.03 B) 0.044 2 0.04 It is an amortizing swap, with notional amounts of 2 million and 1 million during its two settlement periods (years 2 and 3). The swap rate is R=0.05267. Find the 3-year spot rate x. 3 X C) 0.045 D) 0.046 E) 0.047 4 0.05
Answer a) and b) Problem 3: Interest Swap Companies A and B have been offered the following rates per annum on a $50 million five-year loan: Company A Company B Floating LIBOR +0.7% LIBOR +1.0% Fixed 6.0% 7.5% Company A requires a floating-rate loan and company B requires a fixed-rate loan. a) Design a swap that will net a bank, acting as an intermediary, 30 basis points (0.3%) per annum and that is equally attractive to the two companies. Illustrate the swap with a diagram. b) Determine the effective financing costs for A and B.
Consider the following countinuous compunding LIBOR spot rates: 3M (2,2% pa.), 6M (2,3% pa.), 9M (2,6% pa.), 12M (3% pa.). Find a simple compunding rate pa. (interest compounded each 4M) which is equivalent to forward rate pa (under countinuous compunding for period starting from the end of 6M till the end of 9M).
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
An investor holds the fixed-payer position in a 7.44%/LIBOR swap with $1M notional principal, semi-annual payments, and exactly one-year remaining. What is the value of the existing fixed-payer position, if the swap rate for new one-year swaps with matching notional principal is 3.57%/LIBOR
QUESTION 3 a. The market values of liabilities and assets are RM115 and RM125, respectively for OFFSHORE bank. The average duration of this bank's assets is 1.55, whereas liability's duration is 0.90. Calculate the duration gap for OFFSHORE bank. b. Based on the calculation of duration gap in the previous questions (i.e., a), what is the change in the market value of net worth as a percentage of assets if interest rates rise from 9% to 11%. c. If DEFI involves in interest-rate forward contracts with GUMTREE, how do you complete this contract to hedge interest rate risk? The value of the contract is RM2 million in face value and offers 4.5% coupon rate. The treasury bond (i.e. financial instrument) has maturity until 2035.
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?
Use the following table of spot rates: Years to Maturity Annual Effective Spot Rate 3.00% 2 3.60% 3. 3.85% 4 4.05% 5. 4.20% For a 2-year-deferred, 3-year interest rate swap with the level notional amount is I million and 1-year spot rate at time 3 is 3%, what is the amount of the net settlement payment at time 4? Is this amount paid by the payer, or by the receiver? O a. 15,950 paid by the receiver Ob. 16,950 pay by the receiver O. 15,950 paid by the payer Od. 16,950 paid by the payer O e. None of the above

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