Aldo's Hair Salons, Inc needs to borrower $50,000,000 for national expansion. Because this is a higher risk company, Aldo would have to pay a floating rate of one year LIBOR plus 450 basis points. Since he is risk averse and wants to know his costs, you ask a consultant what can be done to get a fixed rate. You call Alexandra, old classmate who works in investment banking, and she advises you to get into a fixed/float swap. She can swap the one year LIBOR for 2.50% fixed. One year LIBOR is currently 1.00% Calculate your annual net payment and effective interest rate. Captain Spaulding's Imports currently has a $25,000,000 loan at a floating rate of 30 day LIBOR plus 5.50%. He thinks that interest rates are going to go down, but does not want to take a chance on rising rates. 30 day LIBOR is currently 3%, so you are paying 8.50% (3.00\% LIBOR plus the spread of 5.50% ). Alexandra suggests that the Captain purchase a cap on LIBOR at 4.50% for $225,000 per year. If LIBOR goes to 5%, what is the net payment? Show the cash flows What is the maximum effective interest rate with the cap