+1 862 207 3288 1. A basic interest rate swap is priced as a zero net present value transaction. Explain what this means. Use the two-year swap data from Exhibit 9.8 to demonstrate your arguments.
2. Explain how the outcome from using a basic interest rate swap to hedge borrowing costs will generally differ from using an interest rate cap and an interest rate collar as hedges. Why is there a difference?
