LOS e: Calculate and interpret the fixed rate, if applicable, on an equity swap and the market values of the different types of equity swaps during their lives.

Q1. Consider a fixed-rate semiannual-pay equity swap where the equity payments are the total return on a $1 million portfolio and the following information:

• 180-day LIBOR is 4.2%
• 360-day LIBOR is 4.5%
• Div. yield on the portfolio = 1.2%

What is the fixed rate on the swap?

A)   4.3232%.

B)   4.5143%.

C)   4.4477%.

Q2. Consider a $5 million semiannual-pay floating-rate equity swap initiated when the equity index is 760 and 180-day LIBOR is 3.7%. After 90 days the index is at 767, 90-day LIBOR is 3.4 and 270-day LIBOR is 3.7. What is the value of the swap to the floating-rate payer?

A)   ?$2,726.

B)   ?$3,526.

C)   $3,526.

Q3. Consider a semiannual equity swap based on an index at 985 and a fixed rate of 4.4%. 90 days after the initiation of the swap, the index is at 982 and London Interbank Offered Rate (LIBOR) is 4.6% for 90 days and 4.8% for 270 days. The value of the swap to the equity payer, based on a $2 million notional value is closest to:

A)   $22,314.

B)   $22,564.

C)   ?$22,564.

[此贴子已经被作者于2009-4-2 9:49:00编辑过]

LOS e: Calculate and interpret the fixed rate, if applicable, on an equity swap and the market values of the different types of equity swaps during their lives. fficeffice" />

Q1. Consider a fixed-rate semiannual-pay equity swap where the equity payments are the total return on a $1 million portfolio and the following information:

• 180-day LIBOR is 4.2%
• 360-day LIBOR is 4.5%
• Div. yield on the portfolio = 1.2%

What is the fixed rate on the swap?

A)   4.3232%.

B)   4.5143%.

C)   4.4477%.

Correct answer is C)

(1 – 1/1.045) / (1/1.021 + 1/1.045) = .022239 × 2 = 4.4477%

Q2. Consider a $5 million semiannual-pay floating-rate equity swap initiated when the equity index is 760 and 180-day LIBOR is 3.7%. After 90 days the index is at 767, 90-day LIBOR is 3.4 and 270-day LIBOR is 3.7. What is the value of the swap to the floating-rate payer?

A)   ?$2,726.

B)   ?$3,526.

C)   $3,526.

Correct answer is B)

1.0185 = 1 + 0.037(180/360)

1.0085 = 1 + 0.034(90/360)

767/760 – 1.0185/1.0085 = ?0.00070579 × 5,000,000 = ?$3,526

Note: The 1.0185/1.0085 is the present value of the floating rate side after 90 days.

Q3. Consider a semiannual equity swap based on an index at 985 and a fixed rate of 4.4%. 90 days after the initiation of the swap, the index is at 982 and London Interbank Offered Rate (LIBOR) is 4.6% for 90 days and 4.8% for 270 days. The value of the swap to the equity payer, based on a $2 million notional value is closest to:

A)   $22,314.

B)   $22,564.

C)   ?$22,564.

Correct answer is B)

?$22,564 is the value to the fixed-rate payer, thus $22,564 is the value to the equity return payer.