a) Using examples drawn from business and/or finance, distinguish between speculation and hedging. (2 marks) b) What is a plain vanilla interest rate swap? (2 marks) c) Explain in detail how a five year plain vanilla interest rate swap with a notional value of $1,000,000 and a price of 3% can be used: (Illustrate with diagrams) i) To speculate on changes in interest rates; ii) To s hedge against the risk of an increase in interest rates. (4 marks) d) Morgan Ltd entered into a 4-year interest rate swap contract with a financial institution with a notational amount of USD 100 million. The contract states that Morgan will receive a semi-annual USD fixed rate of 2.5% and in turn pay an MRR (market reference rate). For the first 6 months the MRR is 0.85%. Calculate the first swap settlement value from Morgan Ltd.'s perspective. (2 marks)