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)

Q: Some time ago a swap dealer entered into a Forward Rate Agreement (FRA) that has a notional value of…

A: A forward rate agreement represents an agreement between two parties to exchange the difference…

Q: c) A swap agreement calls for Grand Industries to pay interest annually based on a rate of 1% over…

A: An interest rate swap can be defined as a derivative contract in which one party agrees with the…

Q: You purchased an interest rate swap of which notional principal is $100,000,000 that matures in 10…

A: The minimum amount of payment is computed below:

Q: Which one of the following is an "OIS" Interest Rate Swap? Group of answer choices A. An agreement…

A: An OIS Interest rate swap is where the one of the underlying exposure is Overnight interest. OIS…

Q: Insurance company, IHI, is part of a swap agreement with investment bank Lachlin Bank on a notional…

A: Notional amount=100 millionInterest rate=7% semi-annuallyResidual life=18 monthsInterest payment due…

Q: The continuously compounded interest rate is 5% p.a. and the storage cost for copper is 8% p.a. What…

A:

Q: An investor who owns a interest rate swap pay six-month LIBOR and receive 18.1% (semi-annual…

A: The given details are:The notional Principal: 95 million EuroReceive a fixed rate of 18.1% with…

Q: 2. A company can invest funds for five years at LIBOR minus 40 basis points. The five-year swap rate…

A: Swap Rate be the five-year swap rate (4.5%)Spread be the spread over LIBOR (in basis points)

Q: 2. You are given the following table of spot rates: Year Spot rates 1 3.5% 3.8% 4.6% 4 5.1% Ant and…

A: The conceptual formula:

Q: On January 1, 20X1, Novak, Inc., enters into an interest rate swap and agrees to receive fixed and…

A: An agreement between two parties for financial exchange, of cash flows or liabilities from two…

Q: Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5% and a floating rate of…

A: Answer -   Calculation of Amount that will be realized to fixed rate payer in the swap -   The…

Q: Incredible Inc., a manufacturer of children’s toys, enters into a two-year plain vanilla interest…

A: The cash flows or obligations from two distinct financial instruments are exchanged between two…

Q: An investor is considering the purchase of a 2-year floating-rate note that pays interest…

A: Discount margin is the return which investors get up and above the indexed return. So the difference…

Q: The current five‑year Euro yen and Eurodollar rates are 8% and 12.5% per year, respectively. What is…

A: Implied premium = (1+EURO Dollar)5/(1+EURO Yen)5-1

Q: On January 1, 20X1, Novak, Inc., enters into an interest rate swap and agrees to receive fixed and…

A: An agreement between two parties for financial exchange, of cash flows or liabilities from two…

Q: What is the swap rate? (the fixed rate that will make the interest rate swap zero NPY at the…

A: First, we need to determine the discount factor of each of the interest rate using the formula…

Q: A firm enters into a five-year fixed for float agreement one year ago. Because one year has passed…

A: Value of a plain vanila swap = value of  receipt leg(Vr) - value payment leg (Vp) In this given…

Q: Consider a 5-year $100 fixed notional equity-for-Libor swap, where the stock price at inception was…

A: Swap: It is a derivative contract between the two parties in which they exchange cash flows for a…

Q: of the swap as a percentage of the principal when OIS and LIBOR rates are the same?

A: The worldwide banks that lend to one another in an international interbank market for short-term…

Q: Some time ago a swap dealer entered into a Forward Rate Agreement (FRA) that has a notional value of…

A: FRA: FRA (Forward rate agreements) represents the over-the-counter between some parties that define…

Q: A plain vanilla interest rate swap on a notional principal of $100 million has a remaining life of…

A: Solution Notional principal ($ million) 100 Frequency Semi-annual Fixed-rate 7.7% Remaining…

Q: An investor who owns a interest rate swap pay six-month LIBOR and receive 2.38% (semi-annual…

A: Here, Notional Principal is 99 million Euro Receive six month LIBOR of 2.38% with semi annual…

Q: Tango Bank has contracted to lend $80 million to Delta Co. in three months’ time. This loan will be…

A: The contract premium that Tango Bank must pay for the interest rate put option is approximately…

Q: A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay…

A: To determine the price of the interest rate swap from the corporation's viewpoint after the fixed…

Q: Suppose that oil forward prices for 1 year, 2 years, and 3 years are $109, $128, and $134 per…

A: Swap price refers to the price used for a derivative contract while valuing one asset for another…

Q: Delta Company issues 10,000,000 variable-rate debt at par with a coupon rate of 6% on 1/1/X1 that…

A: On 01.01.X1, Delta company issues variable rate debt = $10000000 Coupon rate = 6% Interest pays…

Q: nsurance company, IHI, is part of a swap agreement with investment bank Lachlin Bank on a notional…

A: In case of interest rate swap, one party pays fixed rate to the counter party and receives the…

Q: The 9-month LIBOR rate is 5%, and the 6-month LIBOR rate is 4%, on the basis of continuous…

A: We first need to determine the forward rate for 6 months, 3 months from now using the formula below:…

Q: A plain vanilla 2-year interest rate swap with annual payments has a notional principal of $1…

A: In an interest rate swap with annual payments, two months have elapsed. The swap needs to be valued…

Q: Al-Yamamah has just entered into a two-year floating-for-fixed swap contract, where payments are…

A: LIBOR: The London Inter-Bank Offered Rate is a weighted average of interest rates generated from…

Q: Consider a $15 million interest-rate swap in which cash flows based on a fixed rate of 5% (with…

A: A swap is a kind of contract in which two parties agree to exchange cash flows on the basis of two…

Q: Give typing answer with explanation and conclusion  You entered into a plain vanilla swap a while…

A: To calculate the value of the swap, we need to discount the expected future cash flows of the swap…

Q: A plain vanilla 2-year interest rate swap with annual payments has a notional principal of $1…

A: In an interest rate swap with annual payments, two months have elapsed. The swap needs to be valued…

Q: A corporation enters into a five-year interest rate swap with a swap bank in which it agrees to pay…

A: Swap is an arrangement between two parties to exchange cash-generating assets within definite time…

Q: What is the continuously compounded zero rate for all maturities? O (a) 12.00% O b) 11.80% O0 11.71%…

A: The question is based on the concept of interest rate swap.  One stream of future interest payments…

Q: Assume oat forward prices over the next 3 years are $2.30, $2.40, and $2.33, respectively. Effective…

A: We can calculate the 3-year swap price by using the interest rates and forward price for the 3 years…

Q: If the spot price for silver is $18.56 per ounce, what should the futures contract price be for a…

A: A derivative is a financial instrument that derived its value from an underlying asset such as…

Q: An interest rate swap with a notional of $100mln involves payment of 5% per annum fixed (paid…

A: Interest rate swap: It represents a contractual agreement between two parties wherein it involves…

Q: Commercial bank A and Savings bank B entered into a swap contract. The swap has a notional principal…

A: Interest rate swap means it is an agreement between two parties to exchange the interest rate, it…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.