1. There are two companies, A and B. They have the following fixed and floating borrowing costs: Fixed rate borrowing 6.5% 8% Floating rate borrowing LIBOR LIBOR +.75% A plans to borrow floating rate from Bank X and B plans to borrow fixed from Bank Y. Both companies are taking 5 year S100,000,000 loans with quarterly payments. A and B will then enter a swap contract with each other. (a) Design a fixed-for-floating swap in which A and B will have an equal cost savings in their borrowing costs after the swap. Draw a diagram that shows the payment to each party (A, B, X, Y) every quarter after the swap. (b) If A and B contract through Swap Bank that charges a fee, how much would each company be willing to pay the swap bank to take the other side of the swap? Describe in terms of percentage the fee the bank is charging. 1. There are two companies, A and B. They have the following fixed and floating borrowing costs: Fixed rate borrowing 6.5% 8% Floating rate borrowing LIBOR LIBOR +.75% A plans to borrow floating rate from Bank X and B plans to borrow fixed from Bank Y. Both companies are taking 5 year S100,000,000 loans with quarterly payments. A and B will then enter a swap contract with each other. (a) Design a fixed-for-floating swap in which A and B will have an equal cost savings in their borrowing costs after the swap. Draw a diagram that shows the payment to each party (A, B, X, Y) every quarter after the swap. (b) If A and B contract through Swap Bank that charges a fee, how much would each company be willing to pay the swap bank to take the other side of the swap? Describe in terms of percentage the fee the bank is charging