JP Morgan makes A 3-year, $10 million, 4% fixed-rate loan to IBM. The loan is financed with one-year CDs. Interest on the CDs is to be reset annually.

To hedge interest rate risk, JP Morgan enters into a $10 million, 3-year plain vanilla SWAP contract with Nationwide Insurance. JP Morgan agrees to pay a fixed rate of interest of 2.5%, while Nationwide will pay LIBOR+0.5%. Payments will be settled at year-end during the next three years. What are the SWAP payments each year based on the following year-end LIBOR rates?

Year 1	Year 2	Year 3
LIBOR = 2%	LIBOR = 3%	LIBOR=1%

• Year 1: no payments.

  Year 2: JP Morgan pays Nationwide $100,000

  Year 3: Nationwide pays JP Morgan $100,000

• Year 1: no payments.

  Year 2: JP Morgan pays Nationwide $350,000

  Year 3: Nationwide pays JP Morgan $150,000

• Year 1: no payments.

  Year 2: Nationwide pays $100,000 to JP Morgan

  Year 3: JP Morgan pays $100,000 to Nationwide

• None of the above

• The answer is not B that is what I got before