- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 37. Pricing and Valuation of Forward Commitments
- Subject 8. Interest Rate Swap Contracts

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**CFA Practice Question**

When the Quantum Electronic swap was first established, the fixed rate was set at 9.75%. To value the swap 180 days into its life, we have the new term structure of interest rates as follows:

What's the value of the swap?

Correct Answer: -0.0030858

The sum of present values is 0.9564 + 0.9091 + 0.8653 = 2.7308. The current equilibrium fixed swap rate is 2 * (1 - 0.8653)/2.7308 = 9.863%. The swap value per dollar notional is V = (9.75% - 9.863%) * 2.7308 = -0.0030858.

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**User Contributed Comments**
2

User |
Comment |
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ashish100 |
Where did that 2 come from in the equilibrium fixed swap rate formula ?? |

ashish100 |
360/180 |