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Calculate the two-year swap rate and the value of the swap

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Reference no: EM133149330

Question - All rates provided below are continuous compounding, swaps have semi-annual coupon payment.

t

0.5

1

1.5

2

2.5

3

r(0, t) (spot rate time 0)

2.00%

2.50%

3.00%

3.50%

3.50%

4.00%

r(0.5, t) (spot rate time 0.5)

1.00%

1.50%

2.00%

2.50%

2.50%

3.00%

Required -

(a) Calculate the 2-year swap rate and the value of the swap at time 0.

(b) Calculate the value of the 2-year swap in part (a) at time 0.5 (after cash payment).

(c) Calculate the forward swap rate of the 2-year forward swap contract with expiry of 1 year.

Reference no: EM133149330

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