Receiving a fixed rate and paying a libor floating rate

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You want to estimate the Fixed Rate for a $100M Notional, 3 year swap that has annual payments. You will be receiving a fixed rate and paying a LIBOR floating rate. The Spot rates for the next three years, based on the yield curve right now, are 6.5%, 8.5% and 9.5%.

1) What is the fixed rate on this vanilla swap so that the market value of the swap at inception is $0?

2) If the Notional amount of the Swap drops by $25M at the end of the first year and $25M at the end of the second year, what is the fixed rate on the swap?

Reference no: EM13729314

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