An asset manager wishes to enter into a two year equity swap in which he will receive the rate of return on the Stock Index in exchange for paying a fixed interest rate. The Stock Index is at…

An asset manager wishes to enter into a two-year equity swap in which he will receive the rate of return on the Stock Index in exchange for paying a fixed interest rate. The Stock Index is at 1150.89 at the beginning of the swap. The swap calls for semiannual payments. a. Calculate the annualized fixed rate on the swap. The current term structure of interest rates is as follows: TermLIBORL₀(180)4.58L₀(360)5.28L₀(540)6.24L₀(720)6.65 b. Calculate the market value of the swap 180 days later if the new term structure is TermLIBORL₀(20)5.44%L₀(200)6.29%L₀(380)6.76%L₀(560)6.97% The Stock Index is at 1204.10. The notional principal of the swap is Rs 10000000. c. Equity swap is the one of the important type of swaps and it is used to manage the risk of the securities. In this regard, explain what is equity swap.