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3. Company X wants to borrow $10,000,000 floating...

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3. 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 below: 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 - 0.15%; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 9.90%. Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30% and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR - 0.15%. What is the value of this swap to the swap bank? ?? A. The swap bank will lose 40 basis points per year on $10,000,000 = $40,000 per year.? B. The swap bank will earn 40 basis points per year on $10,000,000 = $40,000 per year.? C. The swap bank will break even.? D. None of the above 4. 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 below: A swap bank is involved and quotes the following rates five-year dollar interest rate swaps at 10.05%-10.45% against LIBOR flat. Assume both X and Y agree to the swap bank's terms. Fill in the values for A, B, C, D, E, & F on the diagram.? A. = LIBOR; B = 10.45%; C = 10.05%; D = LIBOR; E = LIBOR; F = 12%?B. A = 10%; B. = 10.45%; C = 10.05%; D = LIBOR; E = LIBOR; F = LIBOR + 1?%? C. A = 10%; B = 10.45%; C = LIBOR; D = LIBOR; E = 10.05%; F = LIBOR + 1?%? D. A = 10%; B = LIBOR; C = LIBOR; D = 10.45%; E = 10.05%; F = LIBOR + 1?%? I need for you to include the calculus neede to answer each question please, thank you,Please include the calculus needed to obtain the answer

 

Paper#5521 | Written in 18-Jul-2015

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