Companies X and Y have been offered the following rates per annum on a $10 million 5-yearinvestment

Fixed rate Floating Rate

Company X 5% LIBOR +0.02%

Company Y 5.5% LIBOR +0.05%

Company X requires a fixed-rate investment; company Y requires a floating-rate investment. Design a swap. Show calculations in the table. Fill the table forCompany X.

Year | LIBOR rate(%) | Floating cash flow | Fixed cash flow |Net cash flow

Year 1 | 4% | | |

Year 2 | 4.5% | | |

Year 3 | 5% | | |

Year 4 | 6% | | |

Year 5 | 6.5% | | |

| Total net cash flow: |

b)Why do you think that Company X preferes a fixed-rate investment? (Make a comment by taking into consideration interest rates)