Fixed Borrowing Rate Cost	Floating Rate Borrowing Cost
company X	10%	LIBOR
company Y	12%	LIBOR + 1%

Following proposals by SWAP bank,

• Company X:
  • X prefers to pay LIBOR.
  • X will pay the annual payments on $10,000,000 with the rate of 10%.
  • X will pay the swap bank annual payments on $10,000,000 with the rate of LIBOR 0.15%.
  • SWAP bank will pay to X interest payments on $10,000,000 at a fixed rate of 9.9%.
• Company Y:
  • Y prefers to pay 12%.
  • Y will pay the annual payments on $10,000,000 with the rate of LIBOR+ 1%.
  • Y will pay the swap bank annual payments on $10,000,000 with the rate of 10.3%.
  • SWAP bank will pay to Y interest payments on $10,000,000 at a fixed rate of LIBOR 0.15%.

1)

Using the information given, please find the value of this SWAP to the SWAP Bank.

	a.	$55,000
	b.	None of the above
	c.	$40,000
	d.	$5,000

2)

Using the information given, please find the value of this SWAP to company Y.

	a.	$5,000
	b.	$40,000
	c.	None of the above
	d.	$55,000

3)

Using the information given, please find the value of this SWAP to company X.

	a.	$5,000
	b.	None of the above
	c.	$55,000
	d.	$40,000

10% LIBOR -0.15% LIBOR 0.15% SWAP Bank 9.9% 10.3% LIBOR+1% 10% LIBOR -0.15% LIBOR 0.15% SWAP Bank 9.9% 10.3% LIBOR+1%