Companies A and B have been offered the following rates per annum on a 10 million kr 4-year investment:

Company A has a fixed rate of 6.0% and a floating rate of Libor

Company B has a fixed rate of 6,6% and a floating rate of Libor +0,1%

(a) Design a swap between company A and company B that is equally attractive to both companies, if company A requires a fixed-rate investment and company B requires a floating-rate investment?

(b) Explain how the value of your swap in exercise (a) can be related to values of zero coupon bonds.

(c) Explain how the value of your swap in exercise (a) can be related to values of forward rate agreements.