The current spot interest rate curve is as follows: Years to Maturity12345 Spot Rate4.00%4.50%5.00%6.00%7.00% Tanner borrows 100,000 from a bank. The loan has a variable interest rate that resets at the beginning of each year. The interest rate will be the spot rate at the beginning of each year. Tanner will repay the loan by making 5 annual level principal payments of 20,000. Because he is concerned about high interest rates in the future, Tanner enters into a 5-year interest rate swap with Emily. The notional amount on the swap matches the outstanding balance on the loan. Calculate the swap rate Tanner pays.
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The current spot interest rate curve is as follows: Years to Maturity12345 Spot Rate4.00%4.50%5.00%6...
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