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can you please help solve part C? Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for
can you please help solve part C?
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: Consider the following interest only swap: First, X will borrow externally at 10% and Y will borrow externally at LIBOR +1.5%. Then, they will enter into the following 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 annual payments on $10,000,000 with a fixed rate of 9.90%. In exchange the swap bank will pay to company Y interest payments on $10,000,000 at LIBOR - 0.15\%; A. Company X will save percent per year on a notional principal of for a total savings of B. Company Y will save percent per year on a notional principal of for a total savings of C. What percent does the swap dealer makeStep by Step Solution
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