Suppose that the term structure is described in the following table:

maturity 6-month 12-month 18-month 24-month yield 5% 5.2% 5.4% 5.6%Assume that 6-month LIBOR rate is 5.1%.

What is the market fixed rate (annualized, semiannual compounded) for a 2-year interest rate swap with semiannual payments?

XYZ entered into such a swap as the fixed-rate payer, with a notional amountof $10 million. Two months later, suppose that the yield curve becomes flat at5% for all maturities and the 6-month LIBOR rate is 5.05%. What is the valueof the swap to XYZ?

If the counterpart defaults now, what is the loss to XYZ?