Compute the fixed rate in three-year interest rate swap

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Reference no: EM132039817

I need to solve this problem for homework and I'm having a hard time. This problem is from the book "Derivatives Markets (3rd Edition) (Pearson Series in Finance)" written by Robert L. McDonald. The problem goes as follow (the answer is provided at the end but I need to know how to get to that answer):

Suppose the 1-year effective annual interest rate is 5.8%, the 2-year interest rate is 6.4%, and the3-year interest rate is 6.9%. Compute the fixed rate in a 3-year interest rate swap.

Reference no: EM132039817

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