Tim borrowed $1000 for two years from MZH Bank at a variable interest rate. Tim will make an interest payment to the bank at the end of each year based on the 1-year spot interest rate at the start of that year and also repays $1000 at the end of 2 years. The current one-year spot rate is 3% and the 2-year spot rate is 4%. Tim decided to enter into a two-year interest rate swap with annual settlement periods under which he will swap the variable interest rate for a fixed interest rate. Determine the amount that Tim should pay the swap counterparty at the end of each year under this arrangement. Possible Answers A $30.00 B $35.00 C $39.80 D $40.00 E $50.10 Tim borrowed $1000 for two years from MZH Bank at a variable interest rate. Tim will make an interest payment to the bank at the end of each year based on the 1-year spot interest rate at the start of that year and also repays $1000 at the end of 2 years. The current one-year spot rate is 3% and the 2-year spot rate is 4%. Tim decided to enter into a two-year interest rate swap with annual settlement periods under which he will swap the variable interest rate for a fixed interest rate. Determine the amount that Tim should pay the swap counterparty at the end of each year under this arrangement. Possible Answers A $30.00 B $35.00 C $39.80 D $40.00 E $50.10