A manager enters a swap contract where he will receive variable payments based on the LIBOR (London Interbank Offered Rate) in exchange for paying a fixed rate of 6%. The payments are based on a notional amount of $10 million. They will be exchanged every year for the next 4 years. If LIBOR turns out to be 7% in one year, what will be the profit/loss of the manager at that time?

CHOICES:

$100,000 profit

$94,340 profit

$94,340 loss

$100,000 loss

None of the above