Completed atus empt Score 4 out of 8 points e Elapsed 1 hour, O minute out of 1

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Completed atus empt Score 4 out of 8 points e Elapsed 1 hour, O minute out of 1 hour sults Displayed All Answers, Submitted Answers, Correct Answers, Feedback tion 1 Suppose that a commodity's forward prices for 1 year, 2 respectively. The 1-year effective annual interest rate i 37%, the 2-year interest rate is 45% and the 3-year interest rate is 5.3%. What is the 3-year swap price? 0 out of 1 points years, and 3 years are $50, $54, and $63, Selected Answer: c. $151.62 Answers a 450-31X5048 22 (1+1.04g)"XA" C. $151.62 d. $64.00 e. $50.54 151-3 n 2 1 out of 1 poi u1 ur years, and 3 years are $109, $97, and S

Explanation / Answer

Upfront Cost of commodity =present value of forward prices at their respective rates

=50/(1.037)+54/(1.045^2)+63/(1.053^3)= $151.63

To avoid the counterpart risk, the cosumer may make 3 payaments for each Year, suppose "X"

Thus X/(1.037)+X/(1.045^2)+X/(1.053^3)= $151.63

X=$55.41 will be the swap price

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