Algo Rhythm Ltd (ARL) receives fixed rate income of 4% p.a. paid semi-annually, but has borrowed by issuing floating rate notes with a total face value of $3 million. The the rate of 1.6% p.a. shows the mid-rate for 4-year plain vanilla configuration swaps is 1.8% p.a. against Libor flat. (For dealer pays fixed, subtract 5 basis points; for dealer receives fixed, add basis points.) ii) In exactly six months, in the exchange between ARL and the swap dealer, who will be the net receiver, and what will be the net dollar amount. iii) If all payments (ARL's income, swap and floating rate note) coincide, what is ARL's locked-in spread? [4+3+3=10 marks ] Algo Rhythm Ltd (ARL) receives fixed rate income of 4% p.a. paid semi-annually, but has borrowed by issuing floating rate notes with a total face value of $3 million. The the rate of 1.6% p.a. shows the mid-rate for 4-year plain vanilla configuration swaps is 1.8% p.a. against Libor flat. (For dealer pays fixed, subtract 5 basis points; for dealer receives fixed, add basis points.) ii) In exactly six months, in the exchange between ARL and the swap dealer, who will be the net receiver, and what will be the net dollar amount. iii) If all payments (ARL's income, swap and floating rate note) coincide, what is ARL's locked-in spread? [4+3+3=10 marks ]