Your firm has recently issued some fixed rate debt but would prefer to re-structure the debt using an interest rate swap to a floating rate of debt because your firm believes rates will be trending downward over the next several years.Listed below are the details for the existing debt and the desired floating debt:

Fixed rate debt:10 percent

Swap payments:LIBOR plus 1 percent

Expected LIBOR rates:

oEnd of Year 1:9 percent

oEnd of Year 2:8.5 percent

oEnd of Year 3:7 percent

After executing the interest rate swap determine the rate your firm expects to pay on its debt over the next 3 years.