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. $$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Zero } \\\text { Rates }\end{array} & 1 \text {-year } & \text { 2-year } & \text { 3-year } \\\hline \text { USD } & \$ 3 \% & \$ 4 \% & \$ 5 \% \\\hline \text { euro } & € 2 \% & € 3 \% & € 4 \% \\\hline\end{array}$$ In other words,what will you be willing to pay in euro against receiving USD LIBOR?

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