Suppose That You Are a Swap Bank and You Notice

Multiple Choice

Suppose that you are a swap bank and you notice that interest rates on zero coupon bonds are as shown.Develop the 3-year bid price of a dollar swap quoted against flat USD LIBOR. $\begin{array}{lccc}\text { Zero Rates } & 1 \text {-year } & \text { 2-year } & 3 \text {-year } \\\text { USD } & \$ 3 \% & \$ 4 \% & \$ 5 \% \\\text { Euro } & € 2 \% & € 3 \% & € 4 \%\end{array}$ In other words,what will you be willing to pay in euro against receiving USD LIBOR?

A) 5 percent
B) 4 percent
C) 3 percent
D) 2 percent