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Blackwood Bank is considering the following 3-year interest rate swap contract with a face value of $5 million: Fixed rate 10% p.a. BUYER SELLER

Blackwood Bank is considering the following 3-year interest rate swap contract with a face value of $5 million: Fixed rate 10% p.a. BUYER SELLER Market LIBOR Blackwood Bank is currently funding $5 million of 3-year variable-rate mortgage loans with fixed-rate term deposits. To hedge its interest rate risk, should Blackwood Bank enter the swap above as a buyer or seller? Explain your answer.

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