Question: The term structure is flat at 5% per annum with continuous compounding . Some time ago a financial institution entered into a 5- year swap

The term structure is flat at 5% per annum with continuous compounding. Some time ago a financial institution entered into a 5-year swap with a principal of $100 million in which every year it pays 12-month LIBOR and receives 6%. The swap now has two years eight months to run. Four months ago 12-month LIBOR was 4% (with annual compounding). What is the financial institution's credit exposure on the swap?

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