Companies A and B have been offered the following rates per annum on a $20 million five-year loan:

Fixed rate Floating Rate

Company A 5% LIBOR +0.1%

Company B 6.4% LIBOR +0.6%

Company A required a floating-rate loan; Company B required a fixed-rate loan. Design a swap. Show calculations in the table.Fill the table for Company A.

Year LIBOR rate(%) Floating cash flow paid Fixed cash flow received Net cash flow

Year 1 4.0%

Year 2 4.5%

Year 3 5%

Year 4 5.2%

Year 5 5.5%

Total net cash flow