The current term structure of interest rates are given in the following table; all rates are annual rates.

Term to Maturity. 1 2 3

Spot Rate 4%. 4.25%. 4.75%

XYZ Corp is entering an interest rate swap with FinServ so that in the next three years XYZ will pay annual interest at a level constant swap rate of R% (and FinServ will pay at the variable rates).

1. Calculate R.

(R is the number of percent, not the decimal value of the percent. For example in 12.5%, R = 12.5, not 0.125.)

2. if the notional amount is 10,000, calculate the net payment XYZ pays to FinServ at the end of year 1.

(Please enter the net value. For example, enter 7.50 if XYZ pays 7.50 to FinServ, and enter -7.50 if XYZ receives 7.50 from FinServ.)