Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi-annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago was 0.0600. (a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.) LIBOR Rate Zero-coupon Price L(90) 0.0585 L(270) 0.0555 L(450) 0.0565 L(630) 0.0565 b) What is the value of the fixed leg, based on a nominal value of $500,000,000? c) What is the value of the variable leg, based on a nominal value of $500,000,000? d) What is the value of the swap, based on a nominal value of $500,000,000?
Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi-annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago was 0.0600. (a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.) LIBOR Rate Zero-coupon Price L(90) 0.0585 L(270) 0.0555 L(450) 0.0565 L(630) 0.0565 b) What is the value of the fixed leg, based on a nominal value of $500,000,000? c) What is the value of the variable leg, based on a nominal value of $500,000,000? d) What is the value of the swap, based on a nominal value of $500,000,000?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Your firm is currently in an interest rate swap, paying 3.00% fixed, receiving LIBOR+0.25%. The payments are semi-annual. The nominal value is $500M. Below is the relevant term structure of LIBOR rates. The LIBOR rate 3 months ago was 0.0600.
(a) Complete the following table by filling in the zero-coupon price of a $1 bond. (Enter your answer with 4 decimals, such as 0.9987.)
| LIBOR | Rate | Zero-coupon Price |
| L(90) | 0.0585 | |
| L(270) | 0.0555 | |
| L(450) | 0.0565 | |
| L(630) | 0.0565 |
b) What is the value of the fixed leg, based on a nominal value of $500,000,000?
c) What is the value of the variable leg, based on a nominal value of $500,000,000?
d) What is the value of the swap, based on a nominal value of $500,000,000?
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