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1. What is the "dirty" or "full" price of a bond?

2. What is the value of a European swap option that gives the holder the right to enter into a 3-year annual-pay swap in 4 years where a fixed rate of 5% is paid and LIBOR is received? The swap principal is $10 million. Assume that the yield curve is flat at 5% per annum with annual compounding and the volatility of the swap rate is 20%.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92861083

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