Stagecoaches, Inc. has $100,000,000 in 5-year floating rate debt with an interest rate of LIBOR + 3.0% and quarterly payments.
Describe how the firm can use an interest rate swap to create a net fixed rate on the debt.
Given the current fixed-rate on a 5-year swap, what is the company's net fixed rate (including the swap)?
Build a spreadsheet to show that the firm's net interest payment remains constant when LIBOR changes.