The current term structure of LIBOR interest rates is as follows:
L0(180)=0.0585
L0(360)=0.0605
L0(540)=0.0624
L0(720)=0.0665
You want to price the fixed side of an interest rate swap with semiannual payments on a notional of $25 million.
A. What is the annualized fixed rate?
120 days later, the term structure is as follows:
L120(180)=0.0613
L120(360)=0.0629
L120(540)=0.0653
L120(720)=0.0697
B. What is the value of the swap from the point of view of the party paying the floating rate and receiving the fixed rate?
(NO EXCEL WORK. PLEASE SHOW YOUR WORK IN DETAIL)