Interest Rate Swap

Consider a party that we denote as A. The current assets and liabilities of A are as follows.

A receives 2% fixed interest on a 5 yr loan of size $250,000.

A pays Libor +6% interest on a 5 yr loan of size $250,000.

(a) Find the current net liability of A.

(b) Explain with a simple diagram with arrows how A can transform the net liability you found in part (a) to a net fixed 7% liability by entering into a swap agreement with a party B.