Zero rates with annual compounding are as with maturity

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Reference no: EM131495506

Suppose that OIS zero rates with annual compounding are as follow with maturity of 1, 2, 3, 4 years: 2.5%, 2.7%, 2.9%, and 3.0% respectively. The current LIBOR rate is 3% and the LIBOR forward rate for the 1 to 2 year period is 3.2%. In a market, a three year swap rate for a swap with annual payments is 3.2%.

a) find the LIBOR forward rate for 2 to 3 year period.

b) value a three year swap where 4% is received and LIBOR is paid on a principal of $100 million.

c) if the LIBOR forward 3 to 4 year contract is 4.1% what should be the swap rate for a four year swap contract.

Reference no: EM131495506

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