is that the present value of the fixed- rate payments as given by the expression above is equal to the present value of the floating-rate payments. That is, SwapsandCaps/Floors       N Dayst SRånotionalamount´-------------- ´FDFt = PV of floating-rate payments   t = 1 360   Solving for the swap rate     SR = PVoffloating-ratepayments --------------------------------------------------------------------------------------------- N Days -------------- t 360 t = 1     All of the values to compute the swap rate are known. Lets apply the formula to determine the swap rate for our 3-year swap. Exhibit 12.6 shows the calculation of the denominator of the for- mula. The forward discount factor for each period shown in Column (5) is obtained from Column (4) of Exhibit 12.5. The sum of the last column in Exhibit 12.6 shows that the denominator of the swap rate formula is $281,764,282. We know from Exhibit 12.5 that the present value of the floating-rate payments is $14,052,917. Therefore, the swap rate is   SR $14,052,917 = ------------------------------------ $281,764,282 = 0.049875 = 4.9875%     Given the swap rate, the swap spread can be determined. For exam- ple, since this is a 3-year swap, the convention is to use the 3-year on-the- run Treasury rate as the benchmark. If the yield on that issue is 4.5875%,