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Companies X and Y have been offered the following rates per annum on a $10 million 5-year investment: Company X Company Y Fixed Rate 6.0%

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Companies X and Y have been offered the following rates per annum on a $10 million 5-year investment: Company X Company Y Fixed Rate 6.0% 7.0% Floating Rate LIBOR LIBOR+0.2% Company X requires a fixed-rate investment; company Y requires a floating-rate investment. An interest rate swap will net a bank, acting as intermediary, 0.2% per annum and will appear equally attractive to X and Y. After this swap, Company X earns on its investment. 6.3% LIBOR+0.4% 6.4% LIBOR+0.3%

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