Please expalin in detail how to get the answer, The correct answer is D. $105.94

Question

Please expalin in detail how to get the answer, The correct answer is D. $105.94 Thank you

Suppose that a commodity’s forward prices for 1 year, 2 years, and 3 years are $103, $105, and $110, respectively. The 1-year effective annual interest rate is 4.3%, the 2-year interest rate is 3.6%, and the 3-year interest rate is 3.1%. What is the 3-year swap price?

$296.96

$98.99

$89.10

$296.96

$105.94

$80.31

Please expalin in detail how to get the answer, The correct answer is D. $105.94 Thank you

Suppose that a commodity’s forward prices for 1 year, 2 years, and 3 years are $103, $105, and $110, respectively. The 1-year effective annual interest rate is 4.3%, the 2-year interest rate is 3.6%, and the 3-year interest rate is 3.1%. What is the 3-year swap price?

Selected Answer: c.

$296.96

Answers: a.

$98.99

b.

$89.10

c.

$296.96

d.

$105.94

e.

$80.31

Explanation / Answer

= 103/(1.043) + 105/(1.036)^2 + 110/(1.031)^3

= 296.956

x/(1/(1.043) + 1/(1.036)^2 + 1/(1.031)^3) = 296.956

X = 296.956 / {1/(1.043) + 1/(1.036)^2 + 1/(1.031)^3 }

X = 296.956 / { 0.958773 + 0.931709 + 0.912481 }

X = 296.956 / 2.802964

X = 105.9436

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