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Rate at which amount borrowed =LIBOR +1%
To eliminate risk a interest rate swap entered where we will received floating rate and pay fixed rate.
Received under swap = LIBOR +2
Pay under swap =3%
Net interest rate = Total interest rate for payment - Total interest rate received
=LIBOR +1% +3%-(LIBOR+2%) i.e.2%
Interest payment =$1.2 million*2% i.e. $0.024 million
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