(1)Companies X and Y have been offered the following rates per annum on a $10 million 5-year investment.

Company X

Company Y

Floating

LIBOR+0.5%

LIBOR+1%

Fixed

8%

9.2%

Company X prefers a floating-rate loan for the investment; company Y prefers a fixed-rate loan. To reduce financing costs, X borrows at a fixed rate, while Y borrows at a floating rate.

Design a swap contract such that company X has 0.4% interest savings and company Y has 0.3% interest savings.