A UK bank made a 5-year 20 million loan. The loan has a fixed coupon of 5% paid annually. The bank can borrow at a fixed rate of 4% for 5 years. i) If the bank wants to swap the 1 million (5% x 20 million) annuity with a floating rate annuity, what would be the first payment of this swap if SONIA is at 4.5% at the end of year 1? [SONIA is the Sterling Overnight Index Average that replaced LIBOR in the UK.] ii) If SONIA at the end of year 2 is 4%, what is the second payment? iii) If interest rates remain flat at 4% what is the value of the swap at the end of year 2? iv) Following part iii), if, however, interest rates increase to 5%, what is the value of the swap at the end of year 2? v) Explain why a fairly priced swap should have an initial value of zero. [150- word limit.]