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Letamp;#39;s say that weamp;#39;ve got company A over here, and it takes out a $1 million loan, and it pays a variable interest rate on that loan. It pays LIBOR plus 2%. And LIBOR stands for London Interbank Offer Rate. Itamp;#39;s one of the major benchmarks for variable interest rates. And so it pays that to some lender. This is the person who lent company A the money. It pays them a variable interest rate every period. So for example, in period one if LIBOR is at 5%, then in that period, company A will pay 7%, or $70,000 to the lender in that period. In period two, if LIBOR goes, letamp;#39;s say LIBOR goes down a little bit to 4%, then company A is going to pay 4 plus 2, which is 6%, which is $60,000 in interest. Letamp;#39;s say that we have another company, company B, right over here. It also borrows $1 million, but it borrows it at a fixed rate. Letamp;#39;s say it borrows it at a fixed rate of 8%. So in each period, regardless of what happens to LIBOR or any other benchma
