3. (a) Explain how an interest rate swap may serve the needs of two counterparties, Vri.com and Yadine. [12 marks] (b) Calculate the effective interest rate paid by Vri.com and Yadine in the following swap. [8 marks] Vri.com: Borrower rated AA that can borrow for three years at either 5% fixed or LIBOR plus 50 basis points. Yadine: Borrower rate BBB that can borrow for three years at either 8% fixed or LIBOR plus 150 basis points. 5% + 1% Vri.com Yadine LIBOR +50 LIBOR + 5% fixed 3. (a) Explain how an interest rate swap may serve the needs of two counterparties, Vri.com and Yadine. [12 marks] (b) Calculate the effective interest rate paid by Vri.com and Yadine in the following swap. [8 marks] Vri.com: Borrower rated AA that can borrow for three years at either 5% fixed or LIBOR plus 50 basis points. Yadine: Borrower rate BBB that can borrow for three years at either 8% fixed or LIBOR plus 150 basis points. 5% + 1% Vri.com Yadine LIBOR +50 LIBOR + 5% fixed