Question: Problem 4. The LIBOR zero curve is flat at 5% per year with continuously compounded out to 1.5 years. The swap rate for 2-year semiannual

Problem 4. The LIBOR zero curve is flat at 5% per year with continuously compounded out to 1.5 years. The swap rate for 2-year semiannual pay swap is 5.4% per year with semiannual compounding. Estimate the 2-year LIBOR zero rate per year with continuous compounding.

a. 5.00%

b. 5.13%

c. 5.20%

d. 5.34%

e. 5.40%

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