Estimate the two and three-year libor zero rates

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Reference no: EM132018585

In this scenario:

"Currently, the 1-year LIBOR rate is 7.5% with annual compounding. A bank trades swaps where a fixed rate of interest is exchanged for 12-month LIBOR with payments being exchanged annually. The 2- and 3-year swap rates (expressed with annual compounding) are 8.4% and 9.1% per annum. Estimate the 2- and 3-year LIBOR zero rates."

Why when discounting at LIBOR could one represent the swap rate as a coupon bond represented at par?

Reference no: EM132018585

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