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Explanati 18 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: 5/5 points awarded Fixed-Rate Borrowing Cost 10% 12% Floating-Rate Borrowing Cost LIBOR LIBOR + 1.5% Company x Company Y Scored eBook A swap bank proposes the following interest only swap: X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 10.05 percent. Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR -0.15 percent. Print References 10 LIBOR SWAP LIBOR - 15 BANK 10.30% Y 10.05% LIBOR + 1200 What is the value of this swap to the swap bank? Multiple Choice The swap bank will earn 40 basis points per year on $10,000,000 = $40,000 per year