Respuesta :
Answer:
The correct answer to the following question will be "$2.263 million".
Explanation:
In such a floating rate bond, the swap may be viewed as a long positioning paired with such a short squeeze in some kind of a fixed price bond. An appropriate discount rate through quarterly compound growth is 12 percent per annum or 11.8 percent annually with continuous compounding.
The floating rate loan would be worth $100 million right during the next deposit.
The next floating part would be:
⇒ [tex]0.118\times 100\times 0.25[/tex]
⇒ [tex]2.95[/tex]
Therefore the floating rate value will be:
⇒ [tex]2.5e^{-0.1182\times 2/12} +2.5e^{-0.1182\times 5/12}+2.5e^{-0.1182\times 8/12}[/tex]
⇒ [tex]2.5e^{-0.1182\times 11/12}+102.5e^{-0.1182\times 14/12}[/tex]
⇒ [tex]98.678[/tex]
Now, Swap value:
⇒ [tex]100.941-98.678[/tex]
⇒ $[tex]$2.263 \ million[/tex]
We should consider the swap as either a realistic approach to forward rate deals as just an alternative solution.
The estimated value is set to:
⇒ [tex](2.93-2.5)e^{-0.118\times 2/12}+ (3.0.2.5)e^{-0.118\times 5/12}[/tex]
⇒ [tex]+(3.0-2.5)e^{-0.118\times 8/12}+(3.0-2.5)e^{-0.118\times 11/12}[/tex]
⇒ [tex]+(3.0-2.5)e^{-0.118\times 14/12}[/tex]
⇒ $[tex]2.263 \ million[/tex]
