Suppose that OIS rates of all maturities are 6% per annum,continuously compounded.The one-year LIBOR rate is 6.4%,annually compounded and the two-year swap rate for a swap where payments are exchanged annually is 6.8%,annually compounded.
-Which of the following is closest to the LIBOR forward rate for the second year when OIS discounting is used and the rate is expressed with annual compounding?
A) 7.199%
B) 7.221%
C) 7.223%
D) 7.225%
Correct Answer:
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