Consider a plain vanilla (fixed-for-floating) interest rate swap. The notional principle of the swap is $100,000,000 and payments are made annually. The fixed interest rate on the swap is stated as 3% and the floating interest rate on the swap is stated as LIBOR plus 2%.

a.) Suppose a swap trader is engaged in an agreement to pay the fixed rate and receive the floating rate. If the LIBOR rate is 0.5% at the end of the year, what is the traders net cash flow?

b.) If the LIBOR rate is 2.5% at the end of the year, what is the traders net cash flow?