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Question $16$ of

stion $16$

$2$ points

An interest rate swap with a notional value of $$10$ million has three years of remaining life. Payments are exchanged annually. Interest at $4\%$ is paid and $12-$month LIBOR is received. A exchange of payments has just taken place $($so the next payment takes place in one year$).$ The one$-$year, two$-$year and three$-$year LIBOR$/$swap zero rates are $3\%,4\%$ and $5\%$ and the OIS rates are the same. All rates are continuously compounded. What is the value of the swap from the perspective of the fixed rate payer?