A question about swap

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Assume that a bank enters into a USD 100 million, 4-year annual pay interest rate
swap, where the bank receives 6% fixed against 12-month LIBOR. Which of the
following numbers best approximates the current exposure at the end of year 1 if the
swap rate declines 125 basis points over the year?
a. USD 3,420,069
b. USD 4,458,300
c. USD 3,341,265
d. USD 4,331,382

the reference answer is A.
How to get the number?
My approach is:
-Caculate the duration of 4-year -fix bond, with coupn=.06, and rfr=.06, get D=3.67
-Assuem the floating bond duariton= .5
-The exposure=(3.67-.5)*125bps*100m=3.97m

Where step is wrong?
Or I used the wrong approach?

THANKS A LOT

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关键词：question About Quest swap Bout reference question interest receives against

The duration of the 12-month LIBOR is probably ~ 1 year..say ~0.9 year.

pmt=1.25, n=3, 1/y=4.75,fv=0,cpt, pv=3.4201

1# ez2die

我的思路和你差不多，既然问exposure,又给了1.25% yield decline
go for Modifiedn duration

MD of fixed=4/1.06=3.77
MD of floating=1 year， assume annual coupon, and just rest
SWAP MD=2.77
exposure=-2.77*-1.25%*100m=3462500

3楼的那个解释可能更精确，但是考试时我估计我想不出会这么算

m.incredible了解到互换的本质，看来后天的考试时准过了。

m.incredible 发表于 2009-11-14 11:07
pmt=1.25, n=3, 1/y=4.75,fv=0,cpt, pv=3.4201

这个解法不错，就是按定义来的. Swap value=present value of  the difference of cash flow for floating leg and fixed leg