Hi folks,

Here is the relevant data for the question:

- Notional amount = $5 million
- Swap is one-year with quarterly settlement
- Swap fixed rate at initiation is 4.4%
- After 180 days, MRR term structure is flat at 3.5% over the next year

The question then asks us to calculate the value of the swap to the fixed-rate receiver.

Here is the answer given:

Two clarifications I need:

- Why must the new swap fixed rate be 3.5%, if the MRR term structure is flat at 3.5% ?
- In this computation below, why do we use 90 days instead of 180 days in the numerator when adjusting the % to a per-period basis?

Thanks in advance!