## Derivatives

gitimamishra01
Good Student
Posts: 13
Joined: Fri Dec 11, 2015 7:22 am

### Derivatives

I have the following doubts in Quiz 4 of the derivatives
Q7. Whe discountig the riskless bond shouldn't strike price i.e 50 be used?
Q9. Can you please explain the answer in more detail?

Hoping for a quick response
Thank you.

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edupristine
Finance Junkie
Posts: 944
Joined: Wed Apr 09, 2014 6:28 am

### Re: Derivatives

Q7) There is a mistake in this question it will be \$40 instead of \$50.

Q9) Quarter 1:- Fixed payer will pay 5 million * 1.75%( 7% annually, and 7%/4= 1.75% Quarterly) = 87500.
At the same time Index payer will pay 5 million * 3.67% = 183750.
Hence, the fixed payer will receive = 183750-87500 = 96000.

Quarter 2:- Fixed payer will pay 5 million * 1.75%( 7% annually, and 7%/4= 1.75% Quarterly) = 87500.
Again at the same time Index payer receive pay 5 million * -2.24% = -112000
Hence, the Index payer will receive = -112000-87500 = 199500.

Hope this helps you.

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