Explain how each trader would set up a strategy to carry out their intended purpose. Be as specific as possible in each case, by providing details about the strategy: the position (whether long or short), the size of the exposure (notional amount), the number of contracts involved (if more than one), the expiration date of the contracts, etc. In each case, explain whether the trader will realize a profit or a loss if the underlying asset/variable increases by 10%. A corporate treasurer plans to hedge some borrowing costs over the next five years by using an interest rate swap. The treasurer currently pays LIBOR plus a 50 basis point spread on a revolving loan facility, where the size of the loan is $8,000,000. 1. Describe the cash flows that the corporate treasurer wants to pay and receive by using the swap. 2. What swap rate can the corporate treasurer lock in today? What will be the new cost of borrowing for the corporate treasurer? (For swap rates, see http://www.m-equicap.com/libor_swaps.html) 3. Will the corporate treasurer realize a profit or a loss if LIBOR increases by 10% next month and stays there for the next five years?