Milwaukee Insurance Company (MIC) has entered into a four-year plain vanilla swap with a counterparty. The notional principal is $80 million. MIC will pay payments based on a floating rate of the one-year LIBOR plus 80 basis points and receive payments based on a fixed rate of 7.20 percent. Assume the one-year LIBOR is 6.00 percent, 7.20 percent, 8.00 percent, and 9.00 percent, respectively, for the next four years. Determine the net dollar amount to be received (or paid) by MIC each year. Explain your answer.

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