You are holding a fixed-rate payers position in the IRS you have entered into 2 years ago at the swap rate of 2.5% p.a. Now exactly 1 year remains until the maturity of the IRS. Notional principal of the IRS is $100 million. (Swap rates are semi-annually compounded but Libor rates are continuously compounded.) [i] What is the present value of your existing(old) IRS position as of now? [ii] If you enter into a new 1-year IRS as a fixed-rate receiver to offset the existing(old) IRS exposure, how much would be the new IRS rate (p.a.) under current market conditions?

Current Market

Maturity Libor

0.5yr 3.0% pa

1.0yr 3.5% pa