[SOLVED] Math 3618 Homework Yield Rates and Duration Python

Math 3618 Homework (Yield Rates and Duration)

Due November 25, 2024

1. You are given the following spot rates:

You enter into a 3-year interest rate swap (with a notional amount of 100,000) to pay a fixed rate and to receive a floating rates. If the swap has annual payments, what is the fixed rate you should pay?

2. You are given the following spot rates:

You enter into a 3-year interest rate swap to pay a fixed rate and to receive a floating rates. The notional amount increases over time, from 100,000 at time 1, to 200,000 at time 2, to 300,000 at time 3. What is the fixed rate you should pay?

3. The table below shows the spot rates for the given lengths of time.

Use the spot rates to fill in the Pn values.

Calculate the swap rate for a two-year deferred, three-year interest rate swap with settlement at the end of the year. The notional amount is level.

4. A four-year interest rate swap with annual settlement periods has a level notional amount of 5000. Two years have elapsed and you are given the following information at the start of year three:

❼ The price of the one-year zero-coupon bond is P1 = 0.962.

❼ The price of the two-year zero-coupon bond is P2 = 0.919.

❼ The swap rate (set at the initial agreement) is R = 4.25%.

❼ All rates are annual effective.

(a) Calculate the remaining cash flow for the receiver of this swap. Express your answer in amounts and times.

(b) Calculate receiver’s market value of the swap at the start of year three.

5. Company ABC has an existing debt of 2,000,000 on which it makes interest-only annual pay-ments at an annual effective rate of LIBOR plus 0.5% (50 basis points).

ABC decides to enter into a separate swap contract with a notional amount of 2,000,000, on which it makes annual payments at a fixed annual effective rate of 3% in exchange for receiving annual payments at the annual effective LIBOR rate.

The annual effective LIBOR rates over the first and second years of the swap contract are 2.4% and 4.3%, respectively. ABC does not make or receive any other payments.

For years 1 and 2, calculate the net interest payment that ABC makes or (receives), including the payment on their loan and any net payment from the swap contract.