Suppose that the school district had entered the swap in January 2007. Now it is January 2008 and interest rates have fallen to 0% and are expected to remain at 0% for the next 10 years. The school district issues the $58M bond with zero coupons and sells it at face value. What is the value of the swap? How much did the school district save by issuing the bond when the interest rates were 0% vs when the interest rate was 4%?

Answer rating: 100% (QA)

To determine the value of the swap and the savings by issuing the bond when interest rates were 0 co... View the full answer