What is the 3-year swap price on corn? Assume interest rates over the next 3 years are 6.2%, 6.5%, and 6.8%. The prepaid swap price is given as $6.50.
A) $2.10
B) $2.30
C) $2.46
D) $2.64

Question

Quizplus · Accepted Answer

The 3-year swap price is calculated by discounting the prepaid swap price using the given interest rates for each year. The formula is: Swap Price = Prepaid Swap Price / [(1 + r1) * (1 + r2) * (1 + r3)], where r1, r2, and r3 are the interest rates for each year. Plugging in the values: $6.50 / [(1 + 0.062) * (1 + 0.065) * (1 + 0.068)] = $2.46.

What Is the 3-Year Swap Price on Corn? Assume Interest