Question 4 Firm XYZ is holding a long position in a $20 million interest rate swap that has a remaining life of 15 months. Under the terms of the swap, six-month LIBOR is exchanged for 4% per annum (both rates are compounded semiannually). The risk-free interest rate for all maturities is currently 5% per annum with continuous compounding. The six-month LIBOR rate was 4.5% per annum two months ago. a. Compute the current value of the swap to firm XYZ Code your answer in the box below. Clearly comment your working. Display your final answer by running the section. b. Suggest a reason why XYZ entered into the swap in the first place. Type answer here Question 4 Firm XYZ is holding a long position in a $20 million interest rate swap that has a remaining life of 15 months. Under the terms of the swap, six-month LIBOR is exchanged for 4% per annum (both rates are compounded semiannually). The risk-free interest rate for all maturities is currently 5% per annum with continuous compounding. The six-month LIBOR rate was 4.5% per annum two months ago. a. Compute the current value of the swap to firm XYZ Code your answer in the box below. Clearly comment your working. Display your final answer by running the section. b. Suggest a reason why XYZ entered into the swap in the first place. Type answer here