. Consider the following interest-rate swap:

the swap starts today, January 1 of year 1 (swap settlement date)

the floating-rate payments are made quarterly based on actual / 360

the reference rate is 3-month LIBOR

the swap rate is 6%

the notional amount of the swap is $40 million

the term of the swap is three years

(a) Suppose that todays 3-month LIBOR is 5.7%. What will the fixed-rate payer for this interest rate swap receive on March 31 of year 1 (assuming that year 1 is not a leap year)?

(b) What will the fixed-rate payer for this interest rate swap pay on March 31 of year 1 (assuming that year 1 is not a leap year)?