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 below: Fixed-Rate Borrowing Floating-Rate Borrowing Cost Cost Company X 10% LIBOR Company Y LIBOR + 1.5% IJROR SWAP LIBOR-15% A swap bank proposes the following interest only swap: X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 10.05%. Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30% and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR -0.15%. 10.05% BANK 10.30% LIBOR + 1/ What is the value of this swap to X? Xwill save 40 basis points per year on $10.000.000 = $40,000 per year. Xwill save 10 basis points per year on $10,000,000 = $10,000 per year. Xwill LOSE money. Xwill save 5 basis points per year on $10.000.000 = $5.000 per year