Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi- annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago was 0.0600. (a) Complete the following table by filling in the zero - coupon price of a $1 bond. (b) What is the value of the fixed leg, based on a nominal value of $500,000,000? (c) What is the value of the variable leg, based on a nominal value of $500,000,000? d) What is the value of the swap, based on a nominal value of $500,000,000 LIBOR Rate Zero - coupon Price L(90) 0.0585 L(270) 0.0555 L(450) 0.0565 L(630) 0.0565

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
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Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi-
annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago
was 0.0600. (a) Complete the following table by filling in the zero - coupon price of a $1 bond. (b) What is the value of
the fixed leg, based on a nominal value of $500,000,000? (c) What is the value of the variable leg, based on a nominal
value of $500,000,000? d) What is the value of the swap, based on a nominal value of $500,000,000 LIBOR Rate Zero -
coupon Price L(90) 0.0585 L(270) 0.0555 L(450) 0.0565 L(630) 0.0565
Transcribed Image Text:Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi- annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago was 0.0600. (a) Complete the following table by filling in the zero - coupon price of a $1 bond. (b) What is the value of the fixed leg, based on a nominal value of $500,000,000? (c) What is the value of the variable leg, based on a nominal value of $500,000,000? d) What is the value of the swap, based on a nominal value of $500,000,000 LIBOR Rate Zero - coupon Price L(90) 0.0585 L(270) 0.0555 L(450) 0.0565 L(630) 0.0565
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