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Suppose the current term structure of interest rates is (0.076, 0.073, 0.079, 0082, 0.080). A plain vanilla interest rate swap will make payments at the end of each year equal to the floating short rate that was posted at the beginning of that year. A 5-year swap having a notational principal of $10,000 is being configured.

a) What is the value of the floating rate portion of the swap?

b) What is the swap rate?

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Financial Management, Finance

Category:- Financial Management
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