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

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

Section: Chapter Questions

Problem 1PS

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Consider a one-year interest rate swap with semi-annual payments, based on 30/360 day count convention. The term structure of LIBOR spot rates is given as follows: 6-month LIBOR at 7.2%, and 12-month LIBOR at 8.0%. What is the annualized fixed rate on the swap? A. 7.42%. B. 7.93% C. 7.84%. D. 7.56%.
Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5% and a floating rate of 90-day LondonInterbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3% and the current forward ratesfor the next four quarters are 3.2%, 3.6%, 3.8%, and 4%. If these rates are actually realized, at the second quarterlysettlement date, the fixed-rate payer in the swap will:a. receive a payment of $5,000b. receive a payment of $5,000c. receive a payment of $7,500d. neither make nor receive a payment
Suppose that a bank has agreed to the following terms of an interest rate swap:- The notional principal is CAD 300 million and the remaining life of the swap is 11 months.- The bank pays 8% per annum, and receives three-month LIBOR.- Payments are exchanged every three months.- The swap (fixed) rate is 11% per annum for all maturities.- The three-month LIBOR rate a month ago was 12.5% per annum. All rates are compounded quarterly. Estimate the value of the swap using a) a bond-price valuation method, and b) a FRAs-based method?
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?
Suppose we are pricing a five-year Libor-based interest rate swap with annual resets (30/360 day count). The estimated present value factors are given below: Maturity(years) Present ValueFactors1 0.9900992 0.9778763 0.9651364 0.9515295 0.937467 What is the fixed rate of the swap? Answer in 4 decimal places
A $100,000 interest rate swap has a remaining life of 10 months. Under the terms of the swap, six-month LIBOR is exchanged for 4% per annum (compounded semi-annually). Six-month LIBOR forward rates for all maturities are 3.3% (compounded semi-annually). The six-month LIBOR rate was 2.6% two months ago. The risk free rate is 2.7% (cont. comp) for all maturities. What is the value of the swap to the party paying floating? (Required precision: 0.01 +/- 1)
If you are the floating-rate payer in an interest rate swap, paying LIBOR + 40bp with a notional value of $1,000,000 and LIBOR turns out to be 0.72%, 0.83%, 0.91% and 1.03% at the four annual payment dates, what are your dollar payment obligations at those dates?
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
Incredible Inc., a manufacturer of children’s toys, enters into a two-year plain vanilla interest rate swap, in which the corporation will receive a fixed rate and pay a floating rate of LIBOR. The notional amount on this swap is $75 million. Swap payments will be netted every 180 days, and the LIBOR requires the assumption of a 360-day year. The term structure of LIBOR on the swap initiation date is as follows: Days Rate (%) 180 3.50 360 3.55 540 3.60 720 3.70 a. What is the fixed rate determined on the swap initiation date? b. Calculate the swap value on the initiation date.
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 the value of the swap is (a)−558.4 (b)−188.5 (c) 0 (d) 188.5 (e) 558.4
Suppose that a commodity’s respective forward prices for 1 year and 2 years are $150 and $158. The 1-year effective annual interest rate is 5.9%, and the 2-year interest rate is 6.6%. You will pay a fixed rate of $153.85906 in a 2-year swap and receive the floating rate. At the time you enter the swap contract, its value to you is... A.$0.0084 B.$–0.0084 C.$0.0051 D.. $–0.0051 E.$000000
15) U.S. Bancorp and Wells Fargo & Company entered into the fixed-for floating interest rate swap with the following terms, effective for the reset date:Notional principal: $ 10 millionFixed rate: 6.5%Floating rate: 4.6 % + 220 bpsFrequency of payments: quarterlyWhich of the following is most accurate? Select one: at the settlement date the party which has a floating leg will make a payment of $7 500 at the settlement date the party which has a fixed leg will make a payment of $7 500 at the settlement date the party which has a floating leg will make a payment of $30 000 at the settlement date the party which has a floating leg will make a payment of $680 000, and the party which has a fixed leg will make a payment of $650 000 at the settlement date the party which has a floating leg will make a payment of $170 000, and the party which has a fixed leg will make a payment of $162 500 at the settlement date the party which has a fixed leg will make a payment…

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