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Pricing an interest rate swap

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Pricing an interest rate swap. The one-year LIBOR rate is 3%, and the LIBOR forward rate for the 1-year to 2-year period is 3.2%, respectively. The three-year swap rate for a swap with annual payments is 3.2%.

1. What is the LIBOR forward rate for the 2- to 3-year period, if the OIS zero rates for maturities of one, two and three years are 2.5%, 2.7% and 2.9%, respectively?

2. What is the value of a three year swap where 4% is received, and LIBOR is paid on a principal of $100 million? All rates are annually compounded.

Reference no: EM132383997

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