Estimate the two-year swap rate

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A swap dealer has just entered into a two-year swap contract to semi-annually exchange 6-month LIBOR interest for a fixed-rate interest on $100 million. Six-month and twelve-month LIBOR rates are 5% and 5.125%, respectively. The 12×18 and 18×24 LIBOR forward rates are 5.5% and 5.75%, respectively. Estimate the two-year swap rate. All rates are expressed with continuous compounding.

Reference no: EM132499273

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