Briefly explain what an interest rate swap is$.$ Describe how an interest rate swap can be replicated using forward rate agreements.

Assume that an investor has purchased a floating$-$rate security $($non$-$callable$)$ with a $5-$year maturity. The coupon formula for the floater is $6-$month LIBOR plus $200$ basis points and the interest payments are made semi$-$annually. At the time of purchase, $6-$month LIBOR is $7\mathrm{.}5\%.$ In order to purchase the floater the investor borrowed funds by issuing a $5-$year note at par value with fixed semi$-$annual coupons of $7\mathrm{.}0\%.$ With respect to the above transaction, assuming that there is no credit or liquidity risk, under what interest rate scenario can the investor lose money? Would the investor be able to offset the above risk by entering into a payer or receiver interest rate swap?