Hey guys/gals, Question on Swaps if anyone has mastered this. Required reading #37, question #4 discusses the overpayment of a swap. The overpayment increases $0.952 x 1.070024. I understand this conceptually, but what are the numbers used to arrive at the 1.070024? Thanks and good luck studying!
(1+r2)^2 / (1+r1) r2 and r1 are provided… standard methodology of finding the 1f2, 2f3 and so on we learned on Level I
indifference function : you are indifferent between buying and holding for 2 years , or buying for 1 year and rolling over another year
Fantastic, thanks!