Under the terms of an interest rate swap, a financial institution has agreed to pay 9% annual rate and to receive three-month LIBOR in return on a notional principal of $100 million with payment being exchanged every three months. The swap has a remaining life of 17 months. The average of the bid and offer fixed rates currently being swapped for three-month LIBOR is 10% for all maturities. The three-month LIBOR rate one month ago was 10.6%. All rates are compounded quarterly.

1. What should be the price of the swap?

2. How can you decompose the swap into different futures contacts? What are the values of those futures contracts?