# Question

Answer the below questions.

(a) Suppose that at the inception of a five-year interest-rate swap in which the reference rate is 3-month LIBOR the present value of the floating-rate payments is $16,555,000. The fixed-rate payments are assumed to be semiannual. Assume also that the following is computed for the fixed-rate payments (using the notation in the chapter):

What is the swap rate for this swap?

(b) Suppose that the five-year yield from the on-the-run Treasury yield curve is 6.4%. What is the swap spread?

(a) Suppose that at the inception of a five-year interest-rate swap in which the reference rate is 3-month LIBOR the present value of the floating-rate payments is $16,555,000. The fixed-rate payments are assumed to be semiannual. Assume also that the following is computed for the fixed-rate payments (using the notation in the chapter):

What is the swap rate for this swap?

(b) Suppose that the five-year yield from the on-the-run Treasury yield curve is 6.4%. What is the swap spread?

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