Exercise 17-26 * Your answer is incorrect. Try again. On January 2, 2020, Ayayai Company issues a 5-year, $12,700,000 note at LIBOR, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 7.80%. Ayayai Company decides it prefers fixed-rate financing and wants to lock in a rate of 8%. As a result, Ayayai enters into an interest rate swap to pay 8% fixed and receive LIBOR based on $12.7 million. The variable rate is reset to 8.50% on January 2, 2021. (a) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2020. Net interest expense December 31, 2020 (b) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2021. Net interest expense December 31, 2021 $ x Your answer is incorrect. Try again. On January 2, 2020, Pina Co. issued a 4-year, $138,000 note at 6% fixed interest, interest payable semiannually. Pina now wants to change the note to a variable-rate note. As a result, on January 2, 2020, Pina Co. enters into an interest rate swap where it agrees to receive 5% fixed and pay LIBOR of 5.80% for the first 6 months on $138,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.70% on June 30, 2020. (a) Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2020. Net interest expense June 30, 2020 (b) Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2020. Net interest expense December 31, 2020 Click if you would like to Show Work for this question: Open Show Work