1) Compute the initial value of a forward-starting swap that begins att=1, with maturityt=10and a fixed rate of 4.5%. (The first payment then takes place att=2and the final payment takes place att=11as we are assuming, as usual, that payments take place in arrears.) You should assume a swap notional of 1 million and assume that you receive floating and pay fixed.)

2)Compute the initial price of a swaption that matures at timet=5and has a strike of 0. The underlying swap is the same swap as described in the previous question with a notional of 1 million. To be clear, you should assume that if the swaption is exercised att=5then the owner of the swaption will receive all cash-flows from the underlying swap from timest=6tot=11inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)