ABN Company has issued floating-rate notes with a maturity of one-year for a total value of AUD 50 million and the interest rate is BBSW plus 125 basis points. ABN Company now believes that interest rates will rise and wishes to protect itself by entering an interest rate swap. A dealer provides a quote on a swap in which the company will pay a fixed rate 6.5% and receive BBSW. Interest is paid quarterly, and the current BBSW is 5%

(i) Indicate how the ABN Company can use a swap to convert the debt to a fixed rate

(ii) What should be the interest rate for the first floating payment to be made?