ASSIGNMENT 4 1.

Consider an equity swap in which IBM pays the return on a stock index and Google pays a fixed rate of 6 percent. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. The interest payment is calculated based on 180 days in the period and 360 days in the year. Assume the notional amount is $10 million. 2. Figure out party need to make payment in an equity swap in which party A pays the return on stock index 1 and party B pays the return on stock index 2. The notional amount is $25 million. Stock index 1 starts the period at 1500 and goes up to 1600 at the end of the period. Stock index 2 starts the period at 3500 and goes up to 3300 at the end of the period. 3. On the side of party which pay euro and receive dollar, calculate market value of swap if present value of the series of dollar payments in a currency swap per $1 notional amount is $0.03. The present value of the series of euro payments in the same currency swap per 1 is 0.0225. The current exchange rate is $1.05 per euro. Assume the swap has a notional amount of $100 million and 105 million.