Problem A-1 (Algo) Derivatives; interest rate swap [LOA-2] On January 1, 2021, Labtech Circuits borrowed $260,000 from First Bank by issuing a three-year, 9% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 9% fixed interest rate on a notional amount of $260,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year Floating (LIBOR) settlement rates were 9% at inception and 10%, 8%, and 8% at the end of 2021 2022 and 2023, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. These quotes and the fair values of the note are as follows: January 1 2021 Fair value of interest rate swap Fair value of note payable 2021 $ (3,359) $256,641 December 31 2022 $ 2,535 $ 262,535 $260,000 2023 $ $260,000 50-6 Calculate the net effect on earnings of the hedging arrangement in each of the three years. (Ignore income taxes.) (Negative amounts should be indicated by a minus sign.) Net effect on earnings 2021 2022 2023