You are currently in the midst of a swap contract negotiation with a counterparty. You need variable rate financing, and the counterparty is looking for fixed rate financing.

	Your Market	Counterparty's Market
Fixed Rates	7%	8%
Floating Rates	T-bill + 1%	T-bill + .5%

Please provide the following:

a. What type of financing rate should you lock in at the current time (fixed or floating)? Explain why.

b. What type of swap outflow rate should you agree to (fixed or floating)? Explain why.

c. What type of swap inflow rate should you agree to (fixed or floating)? Explain why.