a. You are a corporate treasurer and you would like to convert the exposure your firm has to a 10 year $100,000,000 bond issue it plans to make in the coming days to a floating rate. This bond will replace all of the firm's long term debt. The bond has a coupon rate of 4.0% paid semi-annually. You have been quoted a Receive Fixed Swap that has the same term and payment frequency with a rate of 3.2%. In exchange for this fixed rate you would be paying 6M LIBOR, semi-annually. i. If 6M LIBOR is currently at 0.84% and you enter into the swap, what will the corporation's interest expense for the $100M in long term debt be for the first 6 months? ii. If 6M LIBOR resets to 1.20% in 6 months and you are in the swap, what will the corporations interest expense for the $100M in long term debt be for the combined 12 month period? b. The swap in part 2a above would be cleared at the LCH or the CME, one of the two largest swap clearing houses in the world. These clearing houses require that swap participants post both Initial ( maintenance) and variation margin amounts. i. If the current Swap DVO1 is $90,000 and the swap fixed rate moves up 0.20% on the day how much of a margin call should you expect from that move? Would you be posting ( sending margin) or receiving margin? ii. You are now 5 years down the road and the swap that was originally a 10 year swap only has 5 years remaining. Rates are more or less where they started. Should your maintenance margin be higher or lower now than it was at the start of the swap? Why