5.36 A company's investments earn LIBOR minus 0.5%. Explain how it can use the quotes in Table...
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Question:
5.36 A company's investments earn LIBOR minus 0.5%. Explain how it can use the
quotes in Table 5.5 to convert them to (a) three-, (b) five-, and (c) ten-year fixedrate
investments.
Table 5.5 Swap Quotes Made by a Market Maker (percent per annum)
Maturity (years) Bid Offer Swap Rate
2 2.55 2.58 2.565
3 2.97 3.00 2.985
4 3.15 3.19 3.170
5 3.26 3.30 3.280
7 3.40 3.44 3.420
10 3.48 3.52 3.500
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