You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left. Below is the relevant term structure of LIBOR rates. (a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.) LIBOR rates Zero-coupon Price L(90) 0.0245 L(180) 0.0300 L(270) 0.0330 L(360) 0.0345 L(450) 0.0355 (b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.) LIBOR Rate Zero-coupon Price L(180) 0.0265 0.9869 L(360) 0.0335 0.9673 L(540) 0.0345 0.9500 L(720) 0.0355 0.9320 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.) LIBOR Rate Zero-coupon Price L(180) 0.0265 L(360) 0.0335 L(540) 0.0345 L(720) 0.0355 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left. Below is the relevant term structure of LIBOR rates. (a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.) LIBOR rates Zero-coupon Price L(90) 0.0245 L(180) 0.0300 L(270) 0.0330 L(360) 0.0345 L(450) 0.0355 (b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.) LIBOR Rate Zero-coupon Price L(180) 0.0265 0.9869 L(360) 0.0335 0.9673 L(540) 0.0345 0.9500 L(720) 0.0355 0.9320 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.) LIBOR Rate Zero-coupon Price L(180) 0.0265 L(360) 0.0335 L(540) 0.0345 L(720) 0.0355 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left.
Below is the relevant term structure of LIBOR rates.
(a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.)
LIBOR rates Zero-coupon Price
L(90) 0.0245
L(180) 0.0300
L(270) 0.0330
L(360) 0.0345
L(450) 0.0355
(b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.)
(c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.)
(d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.)
LIBOR Rate Zero-coupon Price
L(180) 0.0265
0.9869
L(360) 0.0335
0.9673
L(540) 0.0345
0.9500
L(720) 0.0355
0.9320
(b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
LIBOR Rate Zero-coupon Price
L(180) 0.0265
L(360) 0.0335
L(540) 0.0345
L(720) 0.0355
(b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
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