Consider a $100 Notional Equity-For-Equity Swap on Two Stocks Where $- \$ 2.00$

Consider a $100 notional equity-for-equity swap on two stocks where the price of the stocks at inception was $40 and $50, respectively. At the present time, sixty-one days after inception, the two stock prices are $39 and $51, respectively. If you pay the return on the first stock and receive the return on the second stock, what is your valuation of the equity swap after sixty-one days? Assume that the Libor interest rate on an ACT/360 basis from now till the next settlement date is 10% for the remaining 122 days.

A) $- \$ 2.00$
B) Zero
C) $+ \$ 4.35$
D) $+ \$ 4.50$

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