Interest rate swap problem
An interest rate swap is based on the yield curve given below.
The fixed payment swap rate is R=0.4936. Find the 3-year spot rate x.
I'm having trouble solving for x. For some reason I keep getting a negative number. This is what I've been doing.
Which isn't correct. The book shows
Can someone point my mistake out please? Thanks
Re: Interest rate swap problem
You should use use .04936 as swap rate (kick yourself!).
Also, your 2.77725.... is not quite right: I get 2.71813...