For bonds, assume coupons paid semi-annually, coupon rates and yields quoted with semi-annual compounding, and redeemable at par unless otherwise noted

- A company is paying the fixed leg of an interest rate swap with a two-year term remaining and a notional amount of $1000. The fixed rate of the swap is 4% and the variable rate is reset annually to the one-year spot rate. Calculate the market value of the swap at the beginning of the second year if the 1yr spot rate is 3% at that time.