Google and Citigroup agree to a plain vanilla swap where they will exchange yearly interest payments over the next 3 years. The notional amount is 100 M$.

Google will pay a fixed effective interest rate of 1.5% per year and Citigroup will pay the 1-year LIBOR rate that is in effect at the beginning of each period.

This effective rate is currently 1.1% per year.

a) What is the cash flow exchanged at time 0?

b) What is the cash flow exchanged in 1 year? The 1-year LIBOR rate is now 1.4%.

c) What is the cash flow exchanged in 2 years? The 1-year LIBOR rate is now 1.65%.

d) What is the cash flow exchanged in 3 years? The 1-year LIBOR rate is now 1.75%.