Joel has a loan of 100,000 to be repaid over three years. The loan has a variable interest rate equal to the LIBOR rate plus a spread of 50 basis points.

At the end of the first year, a quarter of the principal will be repaid. At the end of the second year, half of the remaining principal will be repaid. At the end of the third year, the remaining principal will be repaid.

To mitigate his risk, Joel enters into a three-year interest rate swap with Casey in order to replace the variable rate with a fixed rate. The variable rate of the swap is equal to the one-year LIBOR rate. The notional amount of the interest rate swap matches the loan.

You are given the following t-year spot rates: