You signed a 15-year interest swap (principal USD 1,000,000) with annual payments to pay fixed USD and receive fixed EUR. The quotes are: USD 5.1%-5.15% EUR 10%- 10.05% The spot rate at the time of the was USD 1.00/ EUR. Two years later you want to unwind the swap. The USD interest rate is 4% and the EUR interest rate is also 4%. What is the value of the swap in USD if the spot rate is 1.09? (round to the nearest $)

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: Insurance company, IHI, is part of a swap agreement with investment bank Lachlin Bank on a notional…

A: Notional amount=100 millionInterest rate=7% semi-annuallyResidual life=18 monthsInterest payment due…

Q: In a recent e-news, you observe that the 6-month forward rate is $1.5031 / Euro. Further, if you…

A: To determine if arbitrage profit is possible, we need to analyze the interest rate parity and…

Q: A2) A semi-annual pay interest rate swap where the fixed rate is 6.00% (with semi-annual…

A: As per the given information: Fixed-rate - 6.00%(with semi-annual compounding)Remaining life - 8…

Q: A bank is considering using a “three against six” $2,000,000 FRA to cover its potential loss.  The…

A: Bank is considering using a “three against six” = $2,000,000 FRAthe maturity mismatch from having…

Q: You invest $6780 in a floating rate guaranteed investment certificate. For the first 30 months you…

A: A certificate of ownership or participation in a particular financial instrument or investment is…

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: borrower and lender negotiate a $25,000,000 interest-only loan at an 8.0% interest rate for a term…

A: Yield maintenance fees:Investors can earn the same yield through prepayment. YMF is a prepayment…

Q: An IOU agreement was made between two persons. For a face value of $100,000, it was agreed that the…

A: Face value = $100000 Annual payment (A) = 10.50% of Face value = $10500 Redemption value (R) = 90%…

Q: Incredible Inc., a manufacturer of children’s toys, enters into a two-year plain vanilla interest…

A: The cash flows or obligations from two distinct financial instruments are exchanged between two…

Q: A simple "EE US Treasury Savings Bond" pays the holder $1000 in 30 years. Given that the applicable…

A: To calculate  the bond cost we will use the below formula   Bond cost today = FV/[1+(r/m)]n*m Where…

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: Company AB Fixed (%) 6 7 Floating (%) LIBOR + 0.4 LIBOR + 0.6

A: A swap has to be designed so that A gets the full net benefit of swap. There are multiple ways to…

Q: Some time ago a swap dealer entered into a Forward Rate Agreement (FRA) that has a notional value of…

A: FRA: FRA (Forward rate agreements) represents the over-the-counter between some parties that define…

Q: Recently, a bank offered six-month CDs (Certificate of Deposit) at 6.0% compounded monthly. (Round…

A: Original Value = $1000 Compounding Frequency = 12 Interest Rate = 6% Period = 6 months    a) Annual…

Q: Suppose two firms enter into a 4-year credit default swap on in March 2021. Assume the notional…

A: Quarterly payment refers to the payment made in each quarter by the borrower to the lender for the…

Q: Please explain all calculations and actions please: You are about to sign an interest swap to pay…

A: A swap is a financial derivative contract between two parties that involves the exchange of cash…

Q: You have $10,000 to invest for 90 days. Current spot rate: $1.32/₤. The 90-day forward rate is…

A: No arbitrage forward rate is that rate which is lie and agree with interest rate prevailing in the…

Q: Bank A offers a 1-year Forward Rate Agreement at 7% p.a. which will settle against the 3-month…

A: A financial contract known as a forward rate agreement (FRA) is made between two parties in order to…

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: A financial institution has entered into a swap where it agreed to receive quarterly payments at a…

A: Swap typically refers to exchanging one thing for another. In the context of computing, specifically…

Q: nsurance company, IHI, is part of a swap agreement with investment bank Lachlin Bank on a notional…

A: In case of interest rate swap, one party pays fixed rate to the counter party and receives the…

Q: The 3-month June 2023 dollar interest rate futures contract is currently priced at 95.50. The…

A: An interest-rate futures contract is an agreement between the seller and buyer for the sale of an…

Q: (b) Calculate the effective interest rate paid by Vri.com and Xadine in the following swap. Vri.com:…

A: Interest Swapping- Under this a person who is taking loan at fixed rate wants to changed it into…

Q: Some time ago a swap dealer entered into a Forward Rate Agreement (FRA) that has a notional value of…

A: Specialized financial arrangements that are traded over the counter and permit the counterparties,…

Q: Consider a $15 million interest-rate swap in which cash flows based on a fixed rate of 5% (with…

A: A swap is a kind of contract in which two parties agree to exchange cash flows on the basis of two…

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.