1-An interest rate swap has three years of remaining life Payments are exchanged annually. Interest at 4% is paid and 1

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1-An interest rate swap has three years of remaining life Payments are exchanged annually. Interest at 4% is paid and 12-month LIBOR is received. A exchange of payments has just taken place. The one-year, two-year and three- year LIBOR/swap zero rates are 3%, 4% and 5% All rates an annually compounded. What is the value of the swap if LIBOR discounting is used O 2.58 O 1.06 O 2.06 O 5.47 O o o 2-

1 An Interest Rate Swap Has Three Years Of Remaining Life Payments Are Exchanged Annually Interest At 4 Is Paid And 1 1 (37.24 KiB) Viewed 43 times

Given the spot exchange rate is USD/AUD=0.71, consider the following loans offers for a US firm and an Australian Firm, what is the value of the margin that could be captured by using a swap? US company Australian company US loan ($) Australian Loan (AUD) 89 10.50% 12% 7.5% 0.5% O 1% O 1.5% O 2%