A. Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 7%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 7%. For example, a firm with 10% coupon debt outstanding might like to convert to synthetic floating-rate debt by entering a swap in which it pays LIBOR and receives a fixed rate of 10%. What up-front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $35 million. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)

b. Suppose the U.S. yield curve is flat at 5% and the euro yield curve is flat at 3%. The current exchange rate is $1.25 per euro. What will be the swap rate on an agreement to exchange currency over a 3-year period? The swap will call for the exchange of 2.6 million euros for a given number of dollars in each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)