Question

Practice problem swap rates 3-year bid 3-year ask euro 3.24% 3.28% yen 0.56% 0.59% use the information above and assume the company enters into a swap agreement.

Option 1: 3.26%
Option 2: 3.25%
Option 3: 3.27%
Option 4: 3.29%

Answer 1

The provided swap rates are 3.24% bid for euros and 0.56% bid for yen. Among the given options, the closest rate is 3.26%. (option 1)

Step-by-step explanation:

The swap rates provided are:

• 3-year bid for euros: 3.24%
• 3-year ask for euros: 3.28%
• 3-year bid for yen: 0.56%
• 3-year ask for yen: 0.59%

To enter into a swap agreement, you need to choose an option with a swap rate. None of the given options matches the provided rates exactly. Option 1 has a slightly lower swap rate of 3.26% compared to the 3.24% bid for euros, but it's the closest available option. Therefore, you can select Option 1: 3.26%.