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The counterparties to the swap are the 8 First Renwick Bank (FRB) and the General Manufacturing Corporation (GMC). The notional amount of the swap is
The counterparties to the swap are the 8 First Renwick Bank (FRB) and the General Manufacturing Corporation (GMC). The notional amount of the swap is $100 million. Every year for the next 5 years, FRB agrees to pay GMC 8% per year, while GMC agrees to pay FRB the rate on the 1-year Treasury security. Requirements (answer in the same order requested and indicate each question's number): 1. How much will FRB pay to GMC? Show the formula, do the math, and indicate the units of measurement. 2. In case that the rate of the 1-year Treasury security is 5%, how much will GMC pay to FRB? Show the formula, do the math, and indicate the units of measurement. Your
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