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 here: Fixed-Rate Borrowing Cost Company X 10% Company Y 12% Floating-Rate Borrowing Cost LIBOR LIBOR + 1.5% A swap bank proposes the following interest only swap: Y will pay the swap bank annual payments on $10,000,000 at a fixed rate of 9.90 percent. In exchange the swap bank will pay to company Y interest payments on $10,000,000 at LIBOR 0.15 percent; What is the value of this swap to company Y? Company Y will save 15 basis points per year on $10,000,000 = $15,000 per year. Company Y will save 45 basis points per year on $10,000,000 = $45,000 per year. Company Y will save 5 basis points per year on $10,000,000 = $5,000 per year. Company Y will only break even on the deal.