a. Suppose that at the inception of a five-year interest-rate swap in which the reference rate is three-month LIBOR, the present value of the floating-rate payments is $16,555,000. The fixed rate payments are assumed to be semiannual. Assume also that the following is computed for the fixed-rate payments (using the notation in the chapter):
What is the swap rate for this swap?
b. Suppose that the five-year yield from the on-the-run Treasury yield curve is 6.4%. What is the swap spread?