Question: Your firm just made a three year fixed rate loan
Your firm just made a three year, fixed rate loan at 6.25 percent. You would like to convert this to a floating rate loan that is priced based on three month LIBOR as the base rate. Explain how you could use a basic interest rate swap to accomplish this. Using the data, choose swap terms that convert this fixed rate loan to a floating rate loan and demonstrate the resulting rate you would earn on the loan from adding the swap to the loan position.
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