Question: Suppose that oil forward prices for 1 year 2 years

Suppose that oil forward prices for 1 year, 2 years, and 3 years are $20, $21, and $22.
The 1-year effective annual interest rate is 6.0%, the 2-year interest rate is 6.5%, and the 3-year interest rate is 7.0%.
a. What is the 3-year swap price?
b. What is the price of a 2-year swap beginning in one year? (That is, the first swap settlement will be in 2 years and the second in 3 years.)

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  • CreatedAugust 12, 2015
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