Explanation

The swap rate can be calculated using the formula:

$\text{Swap Rate} = \frac{1 - DF_n}{\sum_{i=1}^n DF_i}$

Where:

• $DF_1 = 0.9709$
• $DF_2 = 0.8653$
• $DF_3 = 0.7938$

Step 1: Calculate the numerator $1 - DF_3 = 1 - 0.7938 = 0.2062$

Step 2: Calculate the denominator $\sum_{i=1}^3 DF_i = 0.9709 + 0.8653 + 0.7938 = 2.6300$

Step 3: Calculate the swap rate $\text{Swap Rate} = \frac{0.2062}{2.6300} = 0.0784 \text{ or } 7.84\%$

This is closest to 7.8%.

Answer: A