Business, 17.06.2021 19:40 whitegirlkodakk9644
XYZ Corp owns a 3-year $10 million par floating rate bond. The coupons on the bond are 12-month LIBOR. XYZ would like to hedge against interest rates falling by entering into an interest rate swap with a $10 million notional that receives a fixed rate and pays a floating rate (12-month LIBOR).
You are given the following prices for zero coupon bonds.
Years of Maturity Zero Coupon Bond Price
1 0.99
2 0.97
3 0.93
Calculate the fixed rate XYZ Corp would receive on the swap.
a. 2.4%
b. 2.7%
c. 3-2%
d. 3-8%
e. 4.5%
Answers: 3
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XYZ Corp owns a 3-year $10 million par floating rate bond. The coupons on the bond are 12-month LIBO...
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