Given the following interest-rate swap:

 Fixed-rate payer pays half of the YTM on a T-note of 6.5%

 Floating-rate payer pays the LIBOR

 Notional principal is $10 million

 Effective dates are 3/23 and 9/23 for the next three years

a. Determine the net receipts of the fixed-rate payer and the floating-rate payer given the following LIBORs:

 3/23/Y1 .055

 9/23/Y1 .060

 3/23/Y2 .065

 9/23/Y2 .070

 3/23/Y3 .075

 9/23/Y3 .080

b. Show in a table how a company with a three-year, $10 million floatingrate loan, with the rate set by the LIBOR on the dates coinciding with the swap, could make the loan a fixed-rate one by taking a position in the swap. What would be the fixed rate?

c. Show in a table how a company with a two-year, $10 million fixed-rate loan at 6.0%, could make the loan a floating-rate one by taking a position in the swap.