Solution:
Value of SWAP = $228,871.25
Please Explain work IN EXCEL 2) You entered in to a swap a while back where...
2) You entered into a plain vanilla swap a while back where you pay 10% per annum with quarterly compounding on a notional principal of $100,000,000 with payments made quarterly. In exchange, you receive a payment of LIBOR. Your swap has 0.8 years left until its termination date. The LIBOR rate was 14.5% per annum with quarterly compounding when you made your last payment. If today's discount rates are per annum with continuous compounding as followed what is the value...
A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per annum and pays six-month LIBOR on a principal of $10 million for five years. Payments are made every six months. Suppose that company X defaults on the sixth payment date (end of year 3) when the interest rate (with semiannual compounding) is 8% per annum for all maturities. What is the loss to the financial institution? Assume...
PLEASE SHOW ALL FORMULAS USED IN EXCEL THANK YOU Your firm is interested in entering into a currency swap where it will pay USD and receive GBP. The notional principle is for 10,000,000 USD and the current spot exchange rate is 1.42 USD/GBP. The swap is to last 3 years and there will be semiannual payments. The discount rate for both countries is listed below and quoted per annum with continuous compounding. US GB Years 2.75% 0.5 2.00% 2.75% 2.25%...
A financial institution needs to build a LIBOR discounting curve for use in valuation. The current 6-month LIBOR rate is 5.37% (semi-annual compounding). Swap rates (also under semi-annual compounding) are given in the table below. Maturity(years) Swap Rate 1 5.3300% 1.5 5.2400% 2 5.1500% 2.5 5.1200% 3 5.0900% 3.5 5.0850% 4 5.0800% 4.5 5.0850% 5 5.0900% Please use these rates to determine the LIBOR / swap zero curve through 5 years, in terms of continuous compounding zero rates.
You can borrow funds for five years at 7%. If you enter into a five-year swap to receive a fixed swap rate of 7.5% in the exchange of paying LIBOR, what rate of interest as a net effect can you transform to by using the swap? A) 6.5% B) LIBOR-0.5% C) LIBOR+0.5% D) No change
Please do ASAP . Thank you The fixed rate on a two-year libor based swap with annual payments is 5%. The Equivalent Annual Rate for a one year investment at the libor rate is 4%. a) Estimate the rate of return on a two-year zero coupon bond investment based on the libor curve. Give your answer as an annual rate with annual compounding. b) Derive the forward rate that an investor would expect to receive on a one-year investment made...
la) Under the terms of a currency swap, a company has agreed to receive a fixed interest rate of 10% per annum on an American dollar loan with a notional principal of $5 million. In exchange, the company will pay a fixed interest rate of 8% per annum on a Dutch Euro Loan with a notional principal of €2.5 million. Net interest payments are exchanged every six months. The swap has a remaining life of thirteen months. The current interest...
QUESTION # 2 Consider a 1-year swap initiated on January 10th, 2013, between Sony and Samsung, Under the terms of the swap contract Sony is agreed to pay Samsung an interest of 6% per annum on a notional principle of Max. Marks 2+1] $200 n Samsung agrees to pay a 3-month LIBOR rate on the same principal. In addition, the payments are exchanged every three months, andthe6%is quoted with quarterly compounding. Following Table shows the LIBOR Samsung (complete the Table...
Question 1 Assume Alpha Ltd is currently trading on the NYSE with a stock price of $65. The American one-year call option on the stock is trading at $20 with strike price of $65. If the one-year rate of interest is 10% p.a. (continuously compounding), is the call price free from arbitrage or is it too cheap/expensive, assuming that the stock pays no dividends? What if the stock pays a dividend of $5 in one year? Question 2 The current...
make to each otner H Princeton Bank and the XYZ Manufacturing Corp. enter into the following five-year 8 swap with a notional amount of $100 million and the following terms: every year for the next five years, Princeton Bank agrees to pay XYZ Manufacturing 6 % per year and receive from XYZ Manufacturing LIBOR. What type of swap is it? b. In the first year payments are to be exchanged, suppose that LIBOR is 3%.What is the amount of the...