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:

I$0=23,850$ I$1=24,000$ L$0=4\mathrm{.}5\%$

What is the net amount exchanged at period $1?$