Question 2 (7 points total): Suppose the company A entered into an interest rate swap deal with a notional amount of $100M USD that is written on 6M LIBOR rate. The exchange is made semi-annually and the swap had maturity of 2 years at the time of initiation with a fixed swap rate of 4%. What is the present value of this swap to Company A, who is receiving fixed side of cash flow, today which is after 1 year since the swap deal was initiated? Assume that the exchange of cash has just taken place. Also assume that continuously compounded annual OIS rate is 5% for all maturities. The following FRA rates are observed in the market today on 6M LIBOR.

FRA Type 0x6 USD LIBOR 6x12 USD LIBOR 12x18 USD LIBOR Rate 3% 5% 4% FRA Type 0x6 USD LIBOR 6x12 USD LIBOR 12x18 USD LIBOR Rate 3% 5% 4%