Please write an essay essay with in text citation, references about the following.
The Ringwood Bank raised $30 million for 4 years at a fixed interest rate of 7% and then loaned the funds to Micro-Technology Inc. The loan calls for an interest rate that changes every year. The interest rate that Micro-Technology agreed to pay is LIBOR plus 400 basis points. At the same time, Ringwood Bank entered into a 4-year interest rate swap with an investment banking firm, Goldman Sachs, with a notional amount of $30 million. The swap terms are as follows: Every year Goldman Sachs pays Ringwood Bank 7.3%; and every year Ringwood Bank pays Goldman Sachs LIBOR plus 150 basis points.
a. What is the risk that Ringwood Bank faces if it does not enter into the interest rate swap?
b. Suppose that LIBOR at a payment date is 3%, what is the interest rate spread that Ringwood Bank would realize?
c. What did Ringwood Bank accomplish by entering into this interest rate swap?