7.21. (a) Company X has been offered the swap quotes in Table 7.3. It can invest for four years at 28%. 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 30 basis points for the next ten years. What fixed rate can it swap this floating rate into? TER 7 167 Marurity (years) Table 7.3 Bid and offer fixed rates in the swap market for a wap where payments are exchanged semiannually (percent per anum) Bid Offer 2.55 2 2.58 2.97 3 3.00 2.985 4 3.15 3.19 3.170 5 3.26 3.30 3.280 3.40 7 3.44 3.420 10 3.48 3.52 3.500 Swap rate 2.565 one nus basis points. The average of the bid and offer fixed rates is known as the swap rate. This is shown in the final column of Table 7.3. n C 7.2 DAY COUNT ISSUES The dar mount conventions affect