Suppose the 1-year effective annual interest rate is 5.8% and the 2-year effective rate is 6.7%. Compute the fixed rate in a 2-year amortizing interest rate swap based on $340,000 of notional principal in the first year and $190,000 in the second year.

a.

6.74%

b.

6.23%

c.

6.11%

d.

6.67%

e.

6.42%

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