Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown here:

	Fixed-Rate		Floating-Rate
	Borrowing Cost		Borrowing Cost
Company X	10%		LIBOR
Company Y	12%		LIBOR + 1.5%

A swap bank is involved and quotes the following rates five-year dollar interest rate swaps at 10.05 percent−10.45 percent against LIBOR flat.

Assume both X and Y agree to the swap bank's terms. Fill in the values for A, B, C, D, E, & F on the diagram.
 

Transcribed Image Text:

SWAP BANK C Y E A F SWAP BANK C Y E A F

Answer rating: 100% (QA)

Company X wants to pay floating rates It borrow money from outside at fixed rate Company Y wants to ... View the full answer