Question: The five-year swap rate when cash flows are exchanged semiannually is 4%. A company wants a swap where it receives payments at 4.2% per annum

  1. The five-year swap rate when cash flows are exchanged semiannually is 4%. A company wants a swap where it receives payments at 4.2% per annum on a principal of $10 million. The OIS zero curve is flat at 3.6%. How much should a derivatives dealer charge the company. All rates are expressed with semiannual compounding. (Ignore bidoffer spreads.)

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