(Answered) Consider a fixed-payer plain vanilla interest rate swap

Finance

Consider a fixed-payer, plain vanilla, interest rate swap paid in arrears with the following characteristics:

(1) The start date is in 12 months, the maturity is 24 months.

(2) Floating rate is 6 month USD Libor.

(3) The swap rate is κ = 5%

(a) Represent the cash flows generated by this swap on a graph.

(b) Create a synthetic equivalent of this swap using two Forward Rate Agreements (FRA) contracts. Describe the parameters of the selected FRAs in detail

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