You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left. Below is the relevant term structure of LIBOR rates. (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 rates Zero-coupon Price L(90) 0.0245 L(180) 0.0300 L(270) 0.0330 L(360) 0.0345 L(450) 0.0355 (b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.) LIBOR Rate Zero-coupon Price L(180) 0.0265 0.9869 L(360) 0.0335 0.9673 L(540) 0.0345 0.9500 L(720) 0.0355 0.9320 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.) LIBOR Rate Zero-coupon Price L(180) 0.0265 L(360) 0.0335 L(540) 0.0345 L(720) 0.0355 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left. Below is the relevant term structure of LIBOR rates. (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 rates Zero-coupon Price L(90) 0.0245 L(180) 0.0300 L(270) 0.0330 L(360) 0.0345 L(450) 0.0355 (b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.) (d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.) LIBOR Rate Zero-coupon Price L(180) 0.0265 0.9869 L(360) 0.0335 0.9673 L(540) 0.0345 0.9500 L(720) 0.0355 0.9320 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.) LIBOR Rate Zero-coupon Price L(180) 0.0265 L(360) 0.0335 L(540) 0.0345 L(720) 0.0355 (b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
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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Question
You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value of $2.5M. The swap has quarterly payments and 5 quarters left.
Below is the relevant term structure of LIBOR rates.
(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 rates Zero-coupon Price
L(90) 0.0245
L(180) 0.0300
L(270) 0.0330
L(360) 0.0345
L(450) 0.0355
(b) What is the value of the fixed leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.)
(c) What is the value of the variable leg, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000.)
(d) What is the value of the swap, based on a nominal value of $2.5M? (Enter your answer in dollars, without the dollar sign, with 0 decimal, such as 2000000; if value is negative, enter with a negative sign.)
LIBOR Rate Zero-coupon Price
L(180) 0.0265
0.9869
L(360) 0.0335
0.9673
L(540) 0.0345
0.9500
L(720) 0.0355
0.9320
(b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
LIBOR Rate Zero-coupon Price
L(180) 0.0265
L(360) 0.0335
L(540) 0.0345
L(720) 0.0355
(b) What should be the fair annualized fixed rate? (Enter your answer with the percentage sign, with 2 decimals, such as 4.89%.)
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