1. Price a plain vanilla one-year interest rate swap with semiannual settlements with a notional principal of $25 million. The current term structure of LIBOR is as follows:

L₀(180) = 5.85%

L₀(360) = 6.05%

What is the semiannual fixed rate payment?

What should the market value of the swap to the counterparties be 120 days later. The term structure of LIBOR 120 days later is as follows:

L₁₂₀(180) = 6.13%

L₁₂₀(360) = 6.29%