Suppose a speculative hedge fund anticipating higher rates in several years purchased a two-year payer swaption on a three-year 6%/LIBOR generic swap with semiannual payments and a notional principal of $20 million for a price equal to 50 bp times the NP. Explain what the fund would do at the swaption’s expiration if the fixed rate on a three-year par value swap were at 7% and at 5%. What would be the fund’s profits or losses at those rates? Use the YTM-approach in valuing the swap’s position.