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In an interest rate swap, a financial institution pays 10% per annum and receives three-month LIBOR in return on a notional principal of $100 million…

In an interest rate swap, a financial institution pays 10% per annum and receives three-month LIBOR in return on a notional principal of $100 million with payments being exchanged every three months. The swap has a remaining life of 11 months. The average of the bid and offer fixed rates currently being swapped for three-month LIBOR is 12% per annum for all maturities. The three-month LIBOR rate one month ago was 11.6% per annum. All rates are compounded quarterly. What is the value of the swap? Use LIBOR discounting with continuous compounding.

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