You are receiving fixed on a 3-year swap at 1 versus libor, Ask an Expert

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You are receiving fixed on a 3-year swap at 1% versus Libor. You pay 50 bps upfront for a one year option to pay fixed at 1% for 2 year.

A. Under what conditions will you exercise the option

B. If you do not exerise the option, what is your annualized return over the three years?

C. At what 2-year rate, one year from now, will you break even on this option?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92753087

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