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Synthetic Floating-Rate Loans

Example:

�A synthetic floating-rate loan formed with a 3-year, $10,000,000, 5% fixed-rate loan combined with the floating-rate payer’s position on the swap just analyzed.

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Synthetic Floating-Rate Loans

1 2 3 4 5 6 7 8Swap Swap Swap Loan Synthetic Loan Synthetic Loan

Effective Dates LIBOR Floating-Rate Fixed-Rate Net Inte rest Received Interest Paid on Payment on Swap Effecti vePayer's Payment* Payer's Payment** by Floating-Rate P ayer 5% Fixed-Rate Loan and Loan Annualized Rate***

Column 4 − Column 3 Column 6 − Column 53/1/Y1 0.0459/1/Y1 0.050 $225,000 $275,000 $50,000 $250,000 $200,000 0.0403/1/Y2 0.055 $250,000 $275,000 $25,000 $250,000 $225,000 0.0459/1/Y2 0.060 $275,000 $275,000 $0 $250,000 $250,000 0.0503/1/Y3 0.065 $300,000 $275,000 -$25,000 $250,000 $275,000 0.0559/1/Y3 0.070 $325,000 $275,000 -$50,000 $250,000 $300,000 0.0603/1/Y4 $350,000 $275,000 -$75,000 $250,000 $325,000 0.065

* (LIBOR/2)($10,000,000)** (.055/2)($10,000,000)*** 2 (Payment on Swap and Loan)/$10,000,000