Length of Investment in Years Spot Interest Rates n=4.0% 12 = 4.5% 1 3 = 5.0% 145.5% 3 2. Home Equity Funding (HEF) borrowed $6,000,000 for three years at a variable interest rate. They paid interest annually on the unpaid balance and repaid 1/3 of the original principal of $6,000,000 at the end of each year. So, at the beginning of the second year they owed $4,000,000 and at the beginning of the third year they owed $2,000,000 HEF entered into a swap agreement with notional amounts equal to their unpaid balance at the beginning of each year. They agreed to pay a constant interest rate R at the end of each year for three years in return for a variable payment based on the spot rate at the beginning of the year. Calculate the swap rate R