(a) Company X has been offered the swap quotes in Table 7.3. It can invest for four years at 2.8%. What floating rate can it swap this fixed rate into?

(b) Company Y has also been offered the swap quotes in Table 7.3. It is confident that it will be able to invest at LIBOR minus 50 basis points for the next ten years. What fixed rate can it swap this floating rate into?

Data from Table 7.3.

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Table 7.3 Bid and offer fixed rates in the swap market for a swap where payments are exchanged semiannually (percent per annum) Maturity (years) Bid Swap rate 2.55 2.565 2.97 2.985 3.15 3.170 3.26 3.40 3.48 2 3 4 5 7 10 Offer 2.58 3.00 3.19 3.30 3.44 3.52 3.280 3.420 3.500