You are given the following spot rates Time Spot Rate 3.0% 3.5% 3 4.0% 4. 4.5% Bill enters into a four-vear interest rate swap where the floating rate resets annually. The notional amount of the swap is 1000 the first year, 1500 the second year, 2500 the third year, and 3000 the fourth year. Determine the swap interest rate. Possible Answers 4.3% 4.5% 4.7 4.8% 4.9%

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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You are given the folloving spot rates:
Time
Spot Rate
1
3.0%
2.
3.5%
3.
4.0%
4.
4.5%
Bill enters into a four-year interest rate swap where the floating rate resets annually. The notional amount of the swap is 1000 the first
year, 1500 the second year, 2500 the third year, and 3000 the fourth year. Determine the swap interest rate.
Possible Answers
A
4.3%
4.5%
4.7%
4.8%
4.9%
Transcribed Image Text:You are given the folloving spot rates: Time Spot Rate 1 3.0% 2. 3.5% 3. 4.0% 4. 4.5% Bill enters into a four-year interest rate swap where the floating rate resets annually. The notional amount of the swap is 1000 the first year, 1500 the second year, 2500 the third year, and 3000 the fourth year. Determine the swap interest rate. Possible Answers A 4.3% 4.5% 4.7% 4.8% 4.9%
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