Explain why a plain vanilla interest swap has no initial

Assignment Help Finance Basics
Reference no: EM13512703

1.You remember that the notion of swap/cap/floor parity involves creating a zero cost collar such that the cap premium equals the floor premium.  You are looking at a $50, non-dividend paying stock, with the riskfree rate at 5%.  You wonder what option striking price would make the one-year call premium equal to the one-year put premium.  Your colleague tells you it is simple to figure out and can almost be done in your head.  What striking price gives this result?

2. Explain why a plain vanilla interest swap has no initial value if it is priced at market.

3.A swap dealer notes the following spot interest rates:  six months, 5.55%; twelve months, 5.75%; eighteen months, 5.95%; and twenty-four months, 6.10%.  Determine the equilibrium swap price on a semi-annual payment, two-year swap.

Reference no: EM13512703

Questions Cloud

How fast did she travel : A friend of yours who starts out at the same age as you travels to the alpha centauri solar system which is 4.70 light-years away. How fast did she travel
What is the total compensation cost : What is the measurement date, how long is the service period and what is the total compensation cost, if any?
Define the formation constant for the hydroxo complex : The solubility product for ZnOH2 is 3.0x10^- 16. The formation constant for the hydroxo complex, Zn(OH)4 ^2-, is 4.6x 10^17. A)What is the minimum concentration of OH - required to dissolve 1.5×10-2 mol of Zn(OH)2 in a liter of solution
Prepare the journal entry under the cost method : One hundred shares having a par value of $100 and a market value of $80 are donated back to the corporation. Prepare the journal entry under the cost method.
Explain why a plain vanilla interest swap has no initial : Explain why a plain vanilla interest swap has no initial value if it is priced at market.
Define how many microliters of 1.000 m naoh solution : How many microliters of 1.000 M NaOH solution must be added to 25.00 mL of a 0.1000 M solution of lactic acid HC3H5O3 to produce a buffer with pH = 3.75
What is the speed of the cannonball relative to the earth : A 490 kg cannon fires a 9.0 kg cannonball with a speed of 200 m/s relative to the muzzle. what is the speed of the cannonball relative to the earth
State naoh solution after the following additions of titrant : Find the pH during the titration of 20.00 mL of 0.1350 M benzoic acid, C6H5COOH (Ka = 6.3 multiplied by 10-5), with 0.1350 M NaOH solution after the following additions of titrant.
Compute the equivalent units in the mixing department : Compute the equivalent units in the Mixing Department for July 2009 for each cost category - Refining Department during July and (b) the cost of work in process as of July 31,2009.

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the target debt equity ratio

Fama's Llamas has a WACC of 10.2%. The company's costs of equity is 14%, and its pertax cost of debt is 8.4 percent.

  How much will you pay your friend each year

You worked out a deal with your friend to pay the balance off in five equal payments over the next 5 years, plus 10% compound interest on the unpaid balance at the end of each year. How much will you pay your friend each year?

  What is the annual ocf for the project

If the tax rate is 40 percent, what is the annual OCF for the project? (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount (e.g., 1,234,567).)

  1customers perceptions of what they get for what they have

1.customers perceptions of what they get for what they have to give up is referred to as customer

  Analyzing the option of using professional office

Suppose you have a house that you rent for $1,200 a month. The maintenance expenses on the house average $200 a month. The house cost $89,000 when you purchased it many years ago.

  Determining profit or loss from an investmentthree years

1.determining profit or loss from an investment.nbsp three years ago you purchased 150 shares of ibm stock for 88 a

  Part a the following information is provided in respect of

part a the following information is provided in respect of fedyou ltd for calculation of income tax as required by

  Calculate the implied growth rate in dividends

Just today, Fawlty Foods, Inc.'s common stock paid a $1.40 annual dividend per share and had a closing price of $21. Assume that the market's required return, or capitalization rate.

  Level of operating efficiency

How can a government be tempted to take a profit cannot afford? What sounds better, $250,000 of increased services or $187,500 less in expenditures?

  Computation of value of a bond using various required rate

Computation of Value of a Bond using various required rate of return and when the interest on these bonds is paid and compounded annually.

  Analyse the choices mnes have for handling international

analyse the choices mnes have for handling international trade payments. what are the main issues that affect their

  What is the employment-at-will doctrine

What is the employment-at-will doctrine? What are the exceptions to this doctrine?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd