Question: he 6 - month and 1 2 - month SOFR rates are 3 % and 3 . 5 % , respectively, The for - ward

he 6-month and 12-month SOFR rates are 3% and 3.5%, respectively, The for-
ward rate from 12 months to 18 months is 4.5%. All rates are expressed with
continuous compounding.
(a) Using both bond pricing and FRA approaches, find the swap rate for a 18-
month interest rate swap with payment exchange every 6 months.
(b) What is the value of a 18-month interest rate swap in which 4% is received
and 6-month SOFR is paid on a principal of $100 million with semiannual
payment?

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