3.18 Company Z enters into a 5-year interest rate swap contract on 1 January 2015 as the fixed-rate payer party. The settlement period is one year. The settlement dates are 31 December of each year from 2015 to 2019. The spot rates of interest at the beginning of various years for investment horizons of t = 1, 2, 3, 4 and 5 years are given in the following table. t 1 Jan 2015 1 Jan 2016 1 Jan 2017 1 Jan 2018 1 Jan 2019 1 0.71% 0.79% 0.42% 0.31% 0.35% 2 1.43% 1.24% 0.34% 0.38% 0.64% 3 2.05% 1.72% 0.47% 0.57% 1.05% 4 2.94% 2.59% 0.95% 1.08% 1.78% 5 3.55% 3.24% 1.47% 1.58% 2.31% Spot Rates, Forward Rates and the Term Structure 103 (d) Calculate the interest rate swap net payment on 31 December 2016 for Company Z, assuming a level notional amount of $1 million for the contract. it is ed