Length of Investment in Years 2 Spot Interest Rates ri = 2.0% r2 = 2.5% r3 = 3.0% 14 = 3.5% r's = 4.0% 1. General Manufacturing borrowed 1,000,000 for five years at a variable interest rate. They will pay interest annually and repay the principal in a lump sum at the end of five years. General Manufacturing entered into a swap agreement with a level notional amount of 1,000,000. They agreed to pay a constant interest rate R at the end of each year for five years in return for a variable payment based on the spot rate at the beginning of the year. Using the interest rate table above, calculate the swap rate R