Suppose that the yield curve is flat at 5% per annum with continuous compounding. A swap with a notional principal of $100 million, in which 6% per annum is received and six-month BBSW is paid, will last for another 15 months. Payments are exchanged every six months. The six-month BBSW rate at the last reset date three months ago) was 7% per annum semi-annual compounding). Answer in millions of dollars to two decimal places.
i) What is the value of the fixed-rate bond underlying the swap? _ _ _ _ _ _
ii) What is the value of the floating-rate bond underlying the swap? _ _ _ _ _ _
iii) What is the value of the payment that will be exchanged in 3 months? _ _ _ _ _ _
iv) What is the value of the payment that will be exchanged in 9 months? _ _ _ _ _ _
v) What is the value of the payment that will be exchanged in 15 months? _ _ _ _ _ _
vi) What is the value of the swap? _ _ _ _ _ _

Question

Quizplus · Accepted Answer

The Answer is i): 102.61
ii): 102.21
iii): -0.49
iv): 0.45
v): 0.44
vi): 0.40

Suppose That the Yield Curve Is Flat at 5% Per