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- If you are the floating-rate payer in an interest rate swap, paying LIBOR + 40bp with a notional value of $1,000,000 and LIBOR turns out to be 0.72%, 0.83%, 0.91% and 1.03% at the four annual payment dates, what are your dollar payment obligations at those dates?Finance Assuming we have the following immediate interest rates in the market: 1M - 2.5%, 2M - 2.8%, 3M - 3%, calculate the FRA 1v2 rate. Assume that each month has 30 days and a year has 360 days. If the investor has purchased this contract at the FRA rate calculated above and the interest rate in the market at the time the contract is settled is 3.2%, then in which direction the settlement flows (between the buyer and seller of the contract)? (please use the formula to solve it, thank you)Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OIS swap with two years to maturity where you receive 3% and pay the floating reference rate with principal 1 million. If the payments are made annually with annual compounding the value of the swap is (a)−558.4 (b)−188.5 (c) 0 (d) 188.5 (e) 558.4
- A2) A semi-annual pay interest rate swap where the fixed rate is 6.00% (with semi-annual compounding) has a remaining life of eight months. The six-month LIBOR rate observed four months ago was 5.00% with semi-annual compounding. Today’s two and eight month LIBOR rates are 5.5% and 5.75% (continuously compounded) respectively. Assume that OIS and LIBOR rates are the same. If the swap has a principal value of $100,000, the value of the swap to the party receiving a fixed rate of interest is closest to which of the following ?Q3. A chip supplier signs a 15 year contract worth RM430 million at year zero.Ã Calculate the equivalent equal annual payments over the length of the contract, assuming an interest rate of 10% per year. 4. What is the future value at year 3 of the following set of cash flows if the discount rate is 14%? Year Cash Flow 0 1 2 120 130 170 3 180 Format: 92756000 Format : 694You have account receivables: ₤5 m in one year. o InterestUS: 6.10% per annum & InterestUK: 9% per annum o Spot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity) o Put option strike price: $1.46/£ & Put option premium: $0.02/£ How much will you receive in $ if you use the money market hedge?
- 5. Suppose you have a 2.5-year remaining on an interest rate swap with a notional principal of $10,000, 000 between Company A and Company B. Company A pays fixed rate and Company B pays the float rate. Fixed and float payments are exchanged every year and the last payment was exchanged 6 months ago. The fixed rate is 3.5% per annum, and the floating rate is tied to the annual LIBOR. The previous 1-year LIBOR rate, set 6 months ago, is 2.75%, 6 month LIBOR is 3.25%. the 1.5-year LIBOR is 3.25%, and the 2.5-year LIBOR is 3.50%. Calculate the present value of the fixed and floating legs of the swap, and determine the swap's net present value from Company A's perspective. Assume annual compounding for discounting.1. (15 marks) (a) Consider a two-year interest rate swap with semi-annual payments based on actual/360 day-count and a notional principal of $1 million. Assume that the current six-month LIBOR and the forward LIBORS for the next three periods are as follows: Current Forward No. of Days 6-Month 6-Month Period in Period LIBOR LIBOR 1 181 4.6% 2 184 5.0% 3 181 5.2% 4 184 5.6% (a) What is the swap rate for this swap? (9 marks) (b) After one year, the six-month LIBOR is 5.5% and the forward LIBOR for the next period is 6.0%. What is the value of this swap from the perspective of the floating-rate payer? (6 marks)Suppose that some time ago a financial institution entered into a swap where it agreed to make semiannual payments at a rate of 3.5% per annum and receive LIBOR on a notional principal of $300 million. The swap now has a remaining life of 1.15 years. Payments will therefore be made 0.15, 0.65, and 1.15 years from today. The risk-free rates with continuous compounding for maturities of 0.15, 0.65, and 1.15 years are 2.8%, 3.2%, and 3.4%, respectively. We suppose that the forward LIBOR rates for the 0.15-to- 0.65 year and the 0.65-to-1.15 year periods are 3.4% and 3.7%, respectively, with semiannual compounding. The LIBOR rate applicable to the exchange in 0.15 years was determined 0.35 years ago. Suppose it is 2.9% with semiannual compounding. What is the floating cash flow at time 1.15 (in $ millions)?
- Scenario is that you are suppose to borrow an amount of $9,000,000 for 91 days at LIBOR beginning next September. In this case, we might want to hedge against a potential (Increase or Decrease) in interest rates between now and September by taking necessary position in Euro dollars. Substantiate your answer with what position needs to be taken with explanations?(Motivation for Interest rate swap) National Bank has a $200b Adjustable Rate Mortgage (ARM) as a liability on its balance sheet. The interest rate on the ARM is 2.34%+Libor. As a result, the bank will have to pay floating interest. The bank is considering hedging the risk in the interest payment to the ARM with a three-year interest rate swap. What will be the Bank's net interest rate of payment if it chooses the right swap? Answer: ____________%. Euro-€ Swiss franc U. S. dollar Japanese yen Years Bid Ask Bid Ask Bid Ask Bid Ask 2 3.08 3.12 1.68 1.76 5.43 5.46 0.45 0.49 3 3.25 3.29 2.41 2.68 5.78 6.02 0.56 0.59An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at 4% is paid and 12-month LIBOR is received. A exchange of payments has just taken place. The one-year, two-year and three- year LIBOR/swap zero rates are 3%, 4% and 5%. All rates an annually compounded. What is the value of the swap if LIBOR discounting is used. O 2.58 O 5.47 2.06 O 1.06