Question: Problem 7 . 2 . A $ 1 0 0 million interest rate swap has a remaining life of 1 0 months. Under the terms

Problem 7.2.A $100 million interest rate swap has a remaining life of 10 months. Under the terms of theswap, six-month LIBOR is exchanged for 4% per annum (compounded semiannually). Six-monthLIBOR forward rates for all maturities are 3%(with semiannual compounding). The six-monthLIBOR rate was 2.4% per annum two months ago. Risk-free rates for all maturities are 2.7%with continuous compounding. What is the current value of the swap to the party payingfloating? What is its value to the party paying fixed?

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