Motivation for Interest rate swap) National Bank has a $200b Adjustable Rate Mortgage (ARM) as a liability on its balance sheet. The interest rate on the ARM is 1.61%+Libor. As a result, the bank will have to pay floating interest. The bank is considering hedging the risk in the interest payment to the ARM with a three-year interest rate swap. What will be the Bank's net interest rate of payment if it chooses the right swap?

Answer: ____________%.

	Euro-	Swiss franc	U. S. dollar	Japanese yen
Years	Bid	Ask	Bid	Ask	Bid	Ask	Bid	Ask
2	3.08	3.12	1.68	1.76	5.43	5.46	0.45	0.49
3	3.25	3.29	2.41	2.68	5.78	6.04	0.56	0.59