AB Ltd and XY Corporation negotiate a $15 million, 5-year interest-rate swap in in which AB will pay 4.25% fixed rate to XY and XY will pay Libor to AB (there is no swap dealer involved). The firms will net payments half-yearly. AB generally pays Libor plus 20 basis points for borrowing and XY borrows at 4.10%.

Determine the all-in-cost for AB and XY. It may be useful to create a diagram showing the payment responsibilities of each firm.

Suppose after two years the market is offering a swap rate of 3.25% against Libor. A swap dealer offers to take the swap off ABs hands. How much will AB have to pay the dealer?