Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm


Postby » Wed Nov 06, 2013 1:46 am

A financial institution has agreed to pay 6-month LIBOR and receive 8% per annum (with semi-annual)compounding on a principal of $100 million. The swap has a remaining life of 1.25 years. The LIBOR rates withcontinuous compounding for 3-month, 9-month, and 15-month maturities are 9%, 9.5%, and10% respectively.
The 6-month LIBOR rate at the last payment date was 9.2% (with semiannual compounding). What is the value of the swap to the financial institution?
a. -1.854 million dollars
b. -4.566 million dollars
c. -2.854 million dollars
d. +1.854 million dollars

I dont know why they are discounting 9.2% in floating in .25 years?

Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm


Postby pradeeppdy » Mon Nov 18, 2013 11:46 am

Can you please provide the source of question.

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