Question

In a 3-years Swap agreement the LIBOR zero curve is flat at 1.5% (continuously
compounded). Interest on the agreement is paid semi-annually. The 2-year and 3-year rates
are 5.4% and 5.6% respectively. Assuming the 2.5-years swap rate is average of 2-year and
3-year swap rate. Find the LIBOR zero rates for the maturity of 2.5-years.
(A) 5.342%
(B) 5.500%
(C) 5.442%
(D) 5.444%

Answer 1

you question answer is a 5.345%