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An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at...

An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at 2.25% fixed is paid and 12-month LIBOR is received. An exchange of payments has just taken place. The one-year, two-year and three-year LIBOR Forward rates are 2.25%, 2.40% and 2.6%. The one-year, two-year and three-year OIS rates are 3.25%, 3.00%, and 3.25%. All rates are compounded continuously. What is the value of the swap if the principal is $250 million?

Solutions

Expert Solution

Formula Used:-

Interest Savings=(U4-$V$2)*$V$1

Present Value=W4/(1+V4)^T4

Value of SWAP=SUM(X4:X6)

jeff jeffy answered 2 years ago
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