9. A company plans to borrow $20,000,000 in two years. The loan will be for three years and pay a floating interest rate of Libor with interest payments made every quarter. The company expects interest rates to rise in future years and thus is certain to swap the loan into a fixed-rate loan. In order to ensure that it can lock in an attractive rate, the company plans to purchase a payer swaption expiring in two years, with an exercise rate of 5% a year. The cost of the swaption is $250,000, and the settlement dates coincide with the interest payment dates for the original loan. Assume Libor at the beginning of the settlement period is 6.5% a year.