Suppose the current term structure of interest rates is (0.076, 0.073, 0.079, 0082, 0.080). A plain vanilla interest rate swap will make payments at the end of each year equal to the floating short rate that was posted at the beginning of that year. A 5-year swap having a notational principal of $10,000 is being configured.

a) What is the value of the floating rate portion of the swap?

b) what is the swap rate?

Answer rating: 100% (QA)

Answer An interest rate swap is a type of derivative contract through which two counterparties agree to exchange one stream of future interest payment... View the full answer