XYZ Corp owns a 3-year $10 million par floating rate bond. The coupons on the bond are 12-month LIBOR. XYZ would like to hedge against interest rates falling by entering into an interest rate swap with a $10 million notional that receives a fixed rate and pays a floating rate (12-month LIBOR).

You are given the following prices for zero coupon bonds.

Years to Maturity	Zero-coupon Bond Price
1	0.99
2	0.97
3	0.93

Calculate the fixed rate XYZ Corp would receive on the swap.

A) 2.4%

B) 2.7%

C) 3.2%

D) 3.8%

E) 4.5%