Exam 7: Swaps

A company can invest funds for five years at BBSW minus 30 basis points. The five-year swap rate is 3%. What fixed rate of interest can the company earn? Ignore day count issues.) _ _ _ _ _ _

Which of the following is true? choose one)

The 200-day BBSW zero rate is 3.58% with continuous compounding, and the forward rate from a 90-day bank accepted bill futures quote for a period of 90 days starting in 200 days is 4.25% with continuous compounding. Determine the 290-day zero rate continuously compounded). Answer as a per cent with two decimal places. _ _ _ _ _ _ _ _

Suppose that the yield curve is flat at 5% per annum with continuous compounding. A swap with a notional principal of $100 million, in which 6% per annum is received and six-month BBSW is paid, will last for another 15 months. Payments are exchanged every six months. The six-month BBSW rate at the last reset date three months ago) was 7% per annum semi-annual compounding). Answer in millions of dollars to two decimal places. i) What is the value of the fixed-rate bond underlying the swap? _ _ _ _ _ _ ii) What is the value of the floating-rate bond underlying the swap? _ _ _ _ _ _ iii) What is the value of the payment that will be exchanged in 3 months? _ _ _ _ _ _ iv) What is the value of the payment that will be exchanged in 9 months? _ _ _ _ _ _ v) What is the value of the payment that will be exchanged in 15 months? _ _ _ _ _ _ vi) What is the value of the swap? _ _ _ _ _ _

Suppose you enter into an interest rate swap where you are receiving floating and paying fixed. Which two of the following is true? choose two)