Problem 3 - SWAP: (20 marks) Company X intends to borrow US dollars based on a fixed interest rate, while company Y intends to borrow in Australian dollar also based on a fixed interest rate. The loan amounts are approximately the same, taking into account the current exchange rate. The following loan rates have been proposed to companies to reflect the risks associated with their current situation: Section 2: Company X gets offers: AUD 8.0%, USD 6.6% Company Y gets offers: AUD 9.5%, USD 7.0% 1. Design a swap that will allow the bank as an intermediary institution to achieve a profit of 60 bpt per year (assuming that the entire currency risk is taken over by the bank) and at the same time will bring the same profit to X and Y, compared to the initial situation, without a swap contract. (15 marks) 2. Explain why some companies that issue bonds engage in currency swaps. Why do they not simply issue bonds in the currency that they would prefer to use for making payments