Date: Tuesday, March 27, 2007
Case: G&P Greetings Inc. (UVA-F-1122)
Network File: G&P.xls
Class Objective:
Understanding the valuation and use of interest rate swaps, introducing interest rate caps and swaptions
Assignment:
1. How does the 6.10% swap rate compare with the market rate implied by the Eurodollar Futures prices? Note that the first fixed rate payment for the swap will be in December 1995 and it will be for 3 months of interest. Subsequent payments will be for six months of interest. Is this a competitive rate? Price the swap assuming that the swap will be signed on or about September 12th 1995, the same date as the maturity of the Eurodollar futures contract.
2. Please only skim the discussion on the interest rate caps and the swaption. We will address these briefly in class.