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- 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?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 paymentSuppose you have a 2.5-year remaining on an interest rate swap with a notionalprincipal of $10, 000, 000 between Company A and Company B. Company A pays fixed rateand Company B pays the float rate. Fixed and float payments are exchanged every year andthe last payment was exchanged 6 months ago. The fixed rate is 3.5% per annum, and thefloating rate is tied to the annual LIBOR. The previous 1-year LIBOR rate, set 6 months ago,is 2.75%, 6 month LIBOR is 3.25%. the 1.5-year LIBOR is 3.25%, and the 2.5-year LIBOR is3.50%.Calculate the present value of the fixed and floating legs of the swap, and determine the swap’snet present value from Company A’s perspective. Assume annual compounding for discounting.
- nsurance company, IHI, is part of a swap agreement with investment bank Lachlin Bank on a notional principal of $100 million. IHI has agreed to pay Lachlin Bank the six month BBSW rate and receives 7% pa, convertible half-yearly. If the swap has a residual life of 18 months, and the next interest payment is due in six months, calculate the value of the swap for Lachlin, given BBSW rates (compounding continuously) for the corresponding 6, 12 and 18 month maturities are 6.91% pa, 7.3% pa, 7.35% pa and the half year BBSW rate on the next payment is known to be 7% pa compounding half-yearly. Give your answer in millions of dollars to 2 decimal places. Value = $ ___________ million ANSWER IN TYPING OTHER WISE DOWNVOTE YOUA $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)Consider a $15 million interest-rate swap in which cash flows based on a fixed rate of 5% (with semi-annual compounding) are exchanged for 6-month LIBOR. The swap has a remaining life of 9 months. The 6-month LIBOR that was observed three months ago was 4.85% (with semi-annual compounding). The forward LIBOR for the period between 3 months and 9 months (from today) is 6.14% (with semi-annual compounding). The risk-free rates for 3 months and 9 months are 5.3% and 5.8%, respectively, with continuous compounding. Calculate the value of the swap to the party receiving the fixed rate.
- The 9-month LIBOR rate is 5%, and the 6-month LIBOR rate is 4%, on the basis of continuous compounding and 365 days a year. The 3-month Eurodollar futures price quote for a contract with a delivery date in 6 months should be: a. 93.0000 b. 92.9384 c. 93.0351Consider 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%.A firm enters into a five-year fixed for float agreement one year ago. Because one year has passed the swap has exactly four more years remaining. Since the reset date for the next floating payment is today, the next applicable floating rate can be identified in the table below. Payments from each firm occur at the end of each year. Assume that the firm agreed to pay a fixed rate of 6.45% (based on annual compounding) and to receive the floating rate. The notional amount of the swap is $12 million. Use the following current spot term structure for annual interest rates (all based on continuous compounding) to determine the value of the plain vanilla, fixed for float interest rate swap. Term (years) Spot Zero Annual Interest Rates (based on continuous compounding) 0.5 5% 1 5.5% 1.5 6% 2 6.5% 2.5 7% 3 8% 3.5 8.5% 4 9% 4.5 9.5% 5 10%
- 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.Let's imagine that the OIS rates for one year and two years are 2% and 4% respectively. Now, let's examine an OIS swap set to mature in two years, where you receive a fixed rate of 3% and pay the floating reference rate. The principal amount involved is 1 million. If payments are made annually with annual compounding, what is the value of the swap? (a)−558.4 (b) −188.5 (c) 0 (d)188.5 (e) 558.4Continuously compounded LIBOR rates per annum for 6, 12, and 18-months are given in the table below. The 2-year swap rate is 3% per annum with payments made semiannually. What is the 2-year LIBOR/swap zero rate for 2 years? Use LIBOR discounting 0.5 - 2.0% 1.0 - 2.4% 1.5 - 2.6% 2.0 - ?