You follow the equity index HSI using an index fund in Hong Kong. You have signed an interest rate swap to exchange the capital gains (losses) from your portfolio, against a sequence of cash flows based on 3-month Libor plus 25 bp. The cash flows are exchanged every 90 days. All cash payments occur in Hong Kong dollars. The notional principal is 1 million. a. Draw the cash flow diagram for the first year. b. Let It be the value of the index at time t. Suppose you have the following data: I0 = 23,850 I1 = 24,000 L0 = 4.5% What is the net amount exchanged at period 1?

(for 3 month Libor rate after the end of each 90 day period just use: Libor + 25 bp)

(question is not incomplete)