ayaz_mahmud369

Looks easy after the fact! One problem I had was with the swap period...I don't see how you all assumed it's a one-year swap! Why stop at 270 days when you discount future coupons? Are you just guessing that since they didn't provide other LIBOR rates, you stop there? If it were a 2-year swap, or 6-month swap, the fixed payment would be different...am I right on that?

Another point is that if I sell you the return of my equity portfolio in exchange for 4.4% fixed return (which seems to be the situation here), and my portfolio's value drops at year end, I get compensated for the drop *and* earn 4.4% interest! Sounds weird, doesn't it? If my portfolio goes up 5%, I pay you 5% and you pay me 4.4%. Am I right again on that? If so, then what I have done is equivalent to buying a put on my portfolio *and* earning interest on my portfolio's value as of beginning of year. Again, it sounds bizarre to me, as I'm getting a free put, and free interest...someone stop me please.