Swap dealer notes the following spot interest rates: six months, 3.45%; twelve months, 3.65%; 18 months, 3.90% and 24 months, 4.15%.

a) Determine the equilibrium swap price on a semiannual payment, two-year swap.

b) The swap dealer enters into a $50 million two-year swap with a fixed rate equal to the solution in part a) above. He chooses to hedge this via a stack hedge. Determine the number of Eurodollar futures contracts necessary to do so. Each basis point change in the futures contract is equal to $25.