When calculating the value of the Fixed rate side of the swap, i’m adding the quarterly coupon to the notional value, then discounting that value by the 70-day Euribor rate… The Answer is doing the following to value the fixed side of the swap, not sure it’s making sense to me:
(Coupon * 70-day Euribor) + [(Notional value + coupon)*160-day libor)]
There are two coupon payments remaining – one 70 days hence and one 160 days hence – as well as the principle payment 120 days hence. Thus, you discount one coupon using 70-day LIBOR and discount one coupon and the principle using 160-day LIBOR.