Consider a $70 million semiannualpay floatingrate equity swap initiated when the equity index is 1987 and 180day LIBOR is 2.2%. After 90 days the index is at 2015, the 90day LIBOR is 2.6%, the 180day LIBOR is 2.8% and the 270day LIBOR is 3.1%. What is the value of the swap to the equityreturn payer?
A. 
$673,446.. 

B. 
$3,554,003. 

C. 
$596,331. 

D. 
$673,446 
Given that.
initial equity index = 1987
After 90 days index = 2015
90 days LIBOR . = 2.6%
180 days LiBOR. =2.20%
Calculation of present value of floating rate after 90 days
90 days LIBOR = 1+0.026(90/360) =1.0065
180 days LIBOR = 1+0.022(180/360) = 1.011
PV = 1.011/1.0065 = 1.0044709388
Calculation of present value of equity index after 90 days
PV = (2015/ 1987) = 1.0140915953
The value of the swap to equity return payer would be as follows
Value = 70 millions*(1.0140915953  1.0044709388)
= 70 millions*0.0096206565 = $673,446
Hence,option A' is the correct
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