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

	Fixed Rate	Floating Rate
Company X	8.0%	LIBOR
Company Y	8.8%	LIBOR

Company X requires a fixed-rate investment; company Y requires a floating-rate investment. Design swaps that will net a bank, acting as an intermediary, 0.2% per annum and will appear equally attractive to X and Y.

Choose the best answer below:

A. The bank will enter a swap contract with company X that the bank pays LIBOR and receives 8.3%; and the bank will enter a swap with company Y that the bank pays 8.5% and receives LIBOR.

B. The bank will enter a swap contract with company X that the bank pays 8.3% and receives LIBOR; and the bank will enter a swap with company Y that the bank pays LIBOR and receives 8.5%.

C. The bank will enter a swap contract with company X that the bank pays 8.3% and receives LIBOR; and the bank will enter a swap with company Y that the bank pays 8.5% and receives LIBOR.

D. The bank will enter a swap contract with company X that the bank pays LIBOR and receives 8.3%; and the bank will enter a swap with company Y that the bank pays LIBOR and receives 8.5%.

Group of answer choices

C

A

B.

D Please do not use ChatGPT and explain every step you do! Thank you so much!