1. XYZ enters into a 2-year $100 m notional principal interest rate swap in which it promises to pay a fixed rate and receive the LIBOR rate. The payments are made every six months on the assumption of 30 day month and 360 day year. The term structure of the LIBOR is given below:

Term 180 day 360 day 540 day 720 day

Rate 9% 9.5% 10% 10.2%

a. What should be the fixed payment rate?

b. After 90 days the term structure is :

Term 90 day 270 day 450 day 630 day

Rate 9.5% 10% 10.8% 11.5%

You have been ABC Corp, that is interested in the buying the position on XYZ and you have been asked to calculate how much ABC should pay or receive from XYZ to takeover XYZs end of the deal. What is the fair price of the swap 90 days into the life of the swap?