You're analyzing a 1-year swap with quarterly payments and a notional principal amount of $20 million. Annualized LIBOR spot rates in months today are:

   t

 r_t

   3 3.25%

   6 3.75%

   9 4.25%

   12 4.60%

   

 

Two months into the life of the swap, the term structure of LIBOR is as follows:

   t'

 r_t'

   1   3.10%

   4  3.25%

   7  3.80%

   10 4.35%

   

 

Calculate the present value of the floating rate payments 2 months into the life of the swap

Calculate the first quarterly floating payment in dollars

Calculate the value of the swap to the pay-floating side at 2 months into the life of the swap

Calculate the quarterly fixed payments in dollars

Calculate the (annualized) fixed rate on the swap in percentage terms. 

 

Answer rating: 100% (QA)

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