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1. Consider a $70 million semiannual-pay floating-rate equity swap initiated when the equity index is 1987 and 180-day LIBOR is 2.2%. After 90 days the index is at 2015, the 90-day LIBOR is 2.6%, the 180-day LIBOR is 2.8% and the 270-day LIBOR is 3.1%. What is the value of the swap to the equity-return payer?
A. $-596,331.
B. $673,446..
C. $3,554,003.
D.-$673,446.
2. Consider a 3 × 9 forward rate agreement. The current annualized 90-day money market rate is 2.4% and the 270-day rate is 3.2%. Based on the best available forecast, the 180- day rate at the expiration of the contract is expected to be 3.85%. Assuming a notional principal of $10 million, what value should be placed on the 3 × 9 FRA at time of settlement? (Hint: consider what is the current contract rate (round to 0.001%) in the FRA first and assume that the market rate is realized at the expected rate at its expiration. )
A. $20,157 paid from long to short.
B. $13,294 paid from short to long.
C. $13,490 paid from long to short.
D. $101,104 paid from long to short.
You own a put contract on a Treasury bond with a strike price of 101-12. The contract represents $100,000 of bond principal, and had a premium of $750. The actual Treasury bond price falls 98-16 at the expiration. What is the gain/loss on the positio..
Suppose that the current one-year rate (one-year spot rate) and expected one-year Tbill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:
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