Question: PUT 1 FOR ALL X THEN MAKE THE CALCULATIONS! EXAMPLE: if it is 1x3 then it will be 113!!! 4. Company A and Company B

PUT 1 FOR ALL X

THEN MAKE THE CALCULATIONS!

EXAMPLE: if it is 1x3 then it will be 113!!! PUT 1 FOR ALL X THEN MAKE THE CALCULATIONS! EXAMPLE: if

4. Company A and Company B can borrow according to the rates mentioned in the table below. Company A prefers to borrow by floating rate. On the other hand, Company B prefers to borrow by fixed rate. How can these two companies make a swap agreement by using an intermediary bank? After the swap agreement, what would be their ending borrowing rates? Assume that the intermediary bank, Company A and Company B will have equal absolute value of profit from the agreement. (25 pts) B Fixed rate 129 1X% Floating rate LIBOR +3.5% LIBOR + %

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