2. Interest Rate Swap: JP Morgan Chase and Facebook would like to enter an interest rate swap on September 25th, 2014 on a principal notional of $50 million dollars. JP Morgan Chase will make annual floating payments according to 1-year T-Bill rates plus 30 basis points. Facebook in return will make fixed payments on annual basis. The first cash flow exchange will occur on September 25th, 2015. The contract will last for a period of 10 years, e.g., there will be a total of 10 payments for each company. On September 25th, 2014, the following T-Bill rates are observed:

Maturity	T-Bill rate %
1 years	4.07
2 years	4.02
3 years	4.36
4 years	4.48
5 years	4.69
6 years	4.82
7 years	4.94
8 years	5.17
9 years	5.33
10 years	5.81

a) If there is no cash settlement at the initiation of the contract, what should be the fair fixed rate that Facebook must pay annually?

b) If Facebook prefers a fixed rate of 5.0% annually, what amount of cash settlement is needed between the parties on September 25th, 2014 in order to have a fair contract?