Consider a $100 fixed notional,equity for Libor swap,where the stock price at inception was $35.Two years later,on the stock price was $40.The swap is based on semi-annual payments on both legs,with an ACT/360 convention for the Libor leg.Assume that the number of days in the next period is 183,and the six-month Libor rate was 10%.Of these 92 have elapsed.The 91-day Libor rate for the remaining period is 9% and the stock price is $41.What is the value of the swap from the point of view of the receiver of equity return?
A)
B)
C) Zero.
D)
Correct Answer:
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