Use the zero-coupon bond prices given in the following table to answer the questions that follow.
-Consider a newly issued three-year swap receiving floating paying fixed with principal $10 million dollars,paying the one-year swap rate yearly,and receiving the one-year floating spot rate yearly.What is the value of the swap when it is issued?

Question

Use the zero-coupon bond prices given in the following table to answer the questions that follow. 
-Consider a newly issued three-year swap receiving floating paying fixed with principal $10 million dollars,paying the one-year swap rate yearly,and receiving the one-year floating spot rate yearly.What is the value of the swap when it is issued?

Quizplus · Accepted Answer

At the time of issuance, the value of a swap is zero. This is because the fixed rate agreed upon in the swap is set such that the present value of the fixed payments equals the present value of the expected floating payments, ensuring no initial net advantage or disadvantage to either party.

Use the Zero-Coupon Bond Prices Given in the Following Table