You are receiving fixed on a 3-year swap at 1 versus libor, Financial Management

You are receiving fixed on a 3-year swap at 1 versus libor

You are receiving fixed on a 3-year swap at 1% versus Libor. You pay 50 bps upfront for a one year option to pay fixed at 1% for 2 years.

Under what conditions will you exercise the option?

If you do not exercise the option, what is your annualized return over the three years?

At what 2-year rate, one year from now, will you break even on this option?

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Financial Management: You are receiving fixed on a 3-year swap at 1 versus libor

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Financial Management: You are receiving fixed on a 3-year swap at 1 versus libor

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