A $100 million interest-rate swap has a remaining life of ten months. Under the terms of the swap, six-

month LIBOR is exchanged for 5 percent per annum (compounded semiannually). The average of the bid and ask rates being exchanged for six-month LIBOR in swaps of all maturities is currently 3 percent per annum with continuous compounding. The six-month LIBOR rate was 2.5 percent per annum two months ago. What is the current value of the swap to the party paying floating? What is its value to the party paying fixed? Be sure to apply both the fixed-floating bond method and forward rate agreements method of swap valuation. (20 points)