What difference does it make in Problem 27.4 if the swap rate is observed in 5 years, but the exchange of payments takes place in

(a) 6 years, and

(b) 7 years? Assume that the volatilities of all forward rates are 20%. Assume also that the forward swap rate for the period between years 5 and 7 has a correlation of 0.8 with the forward interest rate between years 5 and 6 and a correlation of 0.95 with the forward interest rate between years 5 and 7.

AppendixLO1