A Firm Can Borrow at a Floating Rate of LIBOR

Multiple Choice

A firm can borrow at a floating rate of LIBOR + 1% on short-term loans.It swaps its short-term payments so that it receives LIBOR + 2% and pays a fixed rate of 3%.If the notional principal is $50 million,what is the amount the firm pays under the swap?

A) $1 million
B) $1.5 million
C) $2 million
D) $2.5 million
E) $3 million