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?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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