Consider a $100 five-year zero-coupon swap to pay fixed and receive floating.The five-year spot rate is 5% expressed with semi-annual compounding.The floating leg makes payments every six months indexed to Libor.What is the final payment on the fixed leg of this swap?
A)$78
B)$100
C)$125
D)$128

Question

Quizplus · Accepted Answer

The final payment on the fixed leg of this swap is the present value of the last six-month payment discounted back to the end of year 5. The present value of $1 received at the end of year 5 is $0.7835, so the final payment on the fixed leg of this swap is $100 x 0.7835 = $78.35.

Consider a $100 Five-Year Zero-Coupon Swap to Pay Fixed and Receive