Under the terms of an interest rate swap, a financial institution has agreed to pay 10% per annum and to receive 3-month LIBOR in return on a notional principal of $100 million with payments being exchanged every 3 months. The swap has a remaining life of 14 months. The average of the bid and offer fixed rates currently being swapped for 3-month LIBOR is 12% per annum for all maturities. The 3-month LIBOR rate 1 month ago was 11.8% per annum. All rates are compounded quarterly. What is the value of the swap?

AppendixLO1