(i) x (, ) means that x is a normally distributed random variable, with mean and standard deviation . (ii) Use continuous compounding for interest rates and discount factors, except where told otherwise

(c) Avon requires a 3-year $25 million floating rate loan and Macy's require a 3year $25 million fixed rate loan. They have been offered the following rates: Design a swap that will net a bank acting as intermediary 30 basis points per annum, that will be equally attractive to both companies