Question 2 20 marks) KG Company and Jackson Group enter into a four-year interest rate swap agreement. KG Company is the floating-rate payer and Jackson Group is the fixed-rate payer. Notional principal amount is $20 million and payments are exchanged annually. The fixed-rate payer will pay 6% p.a., and the floating-rate payer will pay LIBOR phis 120 basis points. What view does KG Company most likely have on the interest rate movement in the next four years? Explain. (3 marks) . Suppose the LIBOR rates in the next four years are as follows Beginning End of year 1 End of year 2 End of year 3 End of year 4 LIBOR 5.60% 4.50% 5.30% 4.30% 5.50% Calculate the profit/loss of KG Company at the end of year 1. year 2. year 3 and year 4. (8 marks) . A swap contract is like a few forward contracts combined into one contract. Do you agree with the sentence? Explain. (4 marks) The floating-rate payer in swap is viewed as being long the bond market. Do you agree with the statement? Explain