FSTI Holdings has 4 major investments in its portfolio, and you have been asked to determine their current market value. Its holdings are as follows:

4. Two years ago, it entered into a 7-year interest-rate swap agreement, with a $25 million notional amount, under which it pays Morgan Trust a fixed rate of 4.2%, and receives 3-month LIBOR. Payments are made quarterly.

Calculate the current value of each of these holdings, using the following assumptions.

4. 5-year interest rate swaps are now being quoted at 3.2% (pay fixed, receive 3-month LIBOR; payments made quarterly), and 7-year interest rate swaps at 3.8% (pay fixed, receive 3-month LIBOR; payments made quarterly). (Hint: Calculate the dollar-amount of contractual fixed payments to Morgan Trust under the swap agreement.) Note: Assume the floating-rate portion is exactly at market, i.e., no gain or loss in value, and will continue to be regardless of market changes. Thus, only the fixed-rate portion is subject to price change.