(Solution) - The one year LIBOR rate is 3 and the forward rate -(2025 Original AI-Free Solution)

Paper Details

The one-year LIBOR rate is 3% and the forward rate for the one- to two-year period is 3.2%. The three-year swap rate for a swap with annual payments is 3.2%. What is the LIBOR forward rate for the 2 to 3 year period if OIS discounting is used and the OIS zero rates for one, two, and three year maturities are 2.5%, 2.7%, and 2.9%, respectively. What is the value of a three-year swap where 4% is received and LIBOR is paid on a principal of $100 million. All rates are annually compounded.