Calculate the value of an interest rate swap with these features: Notional $100M
Pay: 3.5% semi-annually
Receive: BBSW semi-annually
Term: 3 years
I literally have no idea how to do this question as I couldn't find it in my textbook or my lecture slides. So I tried to use the following method. I put the table of data into a graph (using excel) and found the approximate equation for it. From there I was able to find each year's rate.
Then i found each 'coupon payment' was 3.5m and used the discounted cash flow model to find the present value of the interest rate swap (97.66m).
What is the proper way to do this question.