Swaps! a$.$ BounceBaby is an American firm that manufactures rubber. BounceBaby financed production of rubber using a loan denominated in U$.$S$.$ dollars $($USD$)$ but recently signed a contract to deliver its product to India. Pursuant to the contract, BounceBaby will be paid with Indian Rupees $($INR$).$ To hedge its currency exposure, BounceBaby would like to swap its loan into Rupees. The loan matures in one year and has a notional amount of USD $500$ million with an annual coupon rate of $12\%.$ The spot exchange rate is $80$ INR$/$USD$.$ The U$.$S$.$ interest rate is $3\%$ per year and the Indian interest rate is $7\%$ per year, both of which are compounded annually. Design a swap $($such that the initial value of the swap is zero$)$ under which BounceBaby will make a single payment in Indian Rupees one year from now to satisfy its U$.$S$.$ dollar denominated loan. What will BounceBaby receive from and pay to the swap dealer? $(10$ points$)$ b$.$ If in one year the spot exchange rate changes to $75$ INR$/$USD$,$ does BounceBaby make money or lose money on the swap? Why? $[$No need for any calculations here. A brief explanation will suffice.$](4$ points$)$