Suppose the 05-year zero rate is 6 and the 1-year zero rate


Suppose the 0.5-year zero rate is 6% and the 1-year zero rate is 8%. Consider a 1-year, plain vanilla, semi-annual pay, fixed-for-floating interest rate swap.

a) What is the swap rate that will make this swap worth zero?

b) What is the dollar duration of $100 notional amount of this zero-cost swap?

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Financial Management: Suppose the 05-year zero rate is 6 and the 1-year zero rate
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