1. Microsoft issues a four year, floating-rate bond for the amount of $100 Million. It pays annually to bondholders. Because Microsoft would prefer to have a fixed rate payment, it enters into a SWAP with Citibank.

Year	LIBOR (%)	Fixed-Rate payments to Citibank	Floating-Rate payments from Citibank	Net payment to Citibank	Payment to bondholders	Net payment by Microsoft
1	4		4	2	3
2	5		5	1	4
3	6		6	0	5
4	7		7	-1	6

1. Explain the conditions of this SWAP

2. Which is the final fixed rate that Microsoft has to pay?