Company X and Company Y  have just exchanged the payments of an existing interest rate swap and the swap agreement has four years remaining life. Through this swap, Overnight Index Swap(OIS) is exchanged  for 3% interest rate. The OIS rates for the one-year, two-year, and three-year, and four years are 2%, 3%, 4%,and 5% . All rates are annually compounded and Payments are exchanged annually. The value of this swap as a percentage of the principal is :

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To calculate the value of the interest rate swap we need to determine the cash flows exchanged betwe... View the full answer