Question

- Consider a $80 million, 1-year tenor, semiannual-pay floating-rate equity swap initiated when the equity index is 1428 and 180-day LIBOR is 4.2%. After 90 days the index is at 1476, 90-day LIBOR is 4.5% and 270-day LIBOR is 4.7%. What is the value of the swap to the floating-rate payer?

A) -$1,917,600. C) $1,799,088.

B) $1,917,600. D) $1,799,088.

Answer #1

**The answer is B) $1,917,600**

For semi annual pay floating equity swap, the payment is every 180 days.

1.021 = 1+0.021 (180 day libor rate 0.042/2=0.021 since it is semi annual)

1.01125= 1+0.01125 (90 day libor rate 0.045/4=0.01125, 360/90=4)

initial equity index/ 90 day index= 1476/1428

= 1.03361 * 80 million

=$ 82688800

The present value of the floating rate side after 90 days = 1.021/1.01125 = 1.00964

= 1.00964*80 million

= $ 80771200

The value of swap to the floating rate payer= $82688800- $80771200

= $1917600

So, **the correct option is B) $1,917,600**

Consider a $70 million semiannual-pay floating-rate equity swap
initiated when the equity index is 1987 and 180-day LIBOR is 2.2%.
After 90 days the index is at 2015, the 90-day LIBOR is 2.6%, the
180-day LIBOR is 2.8% and the 270-day LIBOR is 3.1%. What is the
value of the swap to the equity-return payer?
A.
$673,446..
B.
$3,554,003.
C.
$-596,331.
D.
-$673,446

Consider a $70 million semiannual-pay floating-rate equity swap
initiated when the equity index is 1987 and 180-day LIBOR is 2.2%.
After 90 days the index is at 2015, the 90-day LIBOR is 2.6%, the
180-day LIBOR is 2.8% and the 270-day LIBOR is 3.1%. What is the
value of the swap to the equity-return payer?
A.
$673,446..
B.
$3,554,003.
C.
$-596,331.
D.
-$673,446

1. Consider the following supply and demand for money of an
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MD = 2000 – 30i
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S = 40 + 5i
I = 400 – 3i
Find the equilibrium interest rate.
3. Consider the following Treasury quote:
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