A Payer Swaption Is Expiring

question 2

Multiple Choice

A payer swaption is expiring.The underlying swap has a two year maturity.Th e present value factors are 0.9259 (one year) and 0.8651 (two years) .The strike rate is 7 percent.What is the value of the swaption per $1 notional amount.

• A)0.0000,since it is out-of-the-money
• B)1.0000
• C)0.0753
• D)0.0095
• E)none of the above

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