Final answer:
The correct answer is that the value of the floating rate bond underlying a swap is worth par immediately after a payment date, as future payments are reset according to LIBOR and discounting these at LIBOR equates to the bond's face value.
Step-by-step explanation:
When LIBOR is used as the discount rate, the value of the floating rate bond underlying a swap is worth par immediately after a payment date. This is because future floating rate payments will be reset based on LIBOR and the principle of present value implies that these payments, discounted at the LIBOR rate, will be equal to the bond's face value. It aligns with the principle that the present value of money moving from borrower to lender over time should match what is received by the borrower and repaid to the lender, confirming that the value of a floating rate bond should reset to its face value when a coupon is paid and the next period's interest rate is set based on LIBOR.