As a swap dealer you were a counterparty in an interest rate swap. Assume that the notional principal for the swap was $8.5 million. You will need to make 5 annual payments of 7.9% interest. You will collect annual floating payments and the floating rate that you will receive is 8.2%.

Assume that the floating rate does no change for the first two years and then falls by 1.4%, what will be your net payments for the 5 years?

a.

-$290,000

b.

$150,000

c.

-$75,000

d.

-$255,000

e.

-$100,000