b. Firm XYZ enters a 5-year swap with firm XYZ to pay LIBOR in return for a fixed 8% rate on notional principal of $10 million. Three years from now, the market rate on 2-year swap is LIBOR for 6%; at this time, firm ABC goes bankrupt and defaults on its swap obligation. 1. Which firm is worse off by the default of ABC and what is their loss? [5 marks] ii. What is the market value of the loss incurred by the firm that is worse off? [5 marks]