Assume that oil forward prices for 1 year, 2 years, and 3 years are $18, $19, and $20. The 1-year effective annual interest rate is 6.5%, the 2-year interest rate is 7.0%, and the 3-year interest rate is 7.5%.
a. What is the 3-year swap price?
b. What is the price of a 2-year swap beginning in one year? (That is, the ?rst swap settlement will be in 2 years and the second in 3 years.)