I. 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 Cost 10% 12% Floating-Rate Borrowing Cost LIBOR LIBOR + 1.5% Company X Company Y 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- 0.15%; in exchange the swap bank will pay to company X interest payments on $10,000,000 at a fixed rate of 9.90%. 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% Y LIBOR - 15% SWAP LIBOR-15% BANK 9.90% 10.30% LIBOR + 1%% 1. Compute the value of this swap to the swap bank? 2. Compute the value of this swap to Company X? 2. Compute the value of this swap to Company Y? II. Company X wants to borrow $10,000,000 for 5 years, company Y wants to borrow 5,000,000 for 5 years. The exchange rate is $2 - El and is not expected to change over the next 5 years. Their external borrowing opportunities are shown below: Company X Company Y $ Borrowing Cost $10% $12% Borrowing Cost 10.5% 13% 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 9.80%; in exchange the swap bank will pay to company X interest payments on 5,000,000 at a fixed rate of 10.5%. Y will pay the swap bank interest payments on 5,000,000 at a fixed rate of 12.80% and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of 12%. 10.50 Y SWAP BANK $9.8% 10.50% $12% 12.80% $12% 1. Compute the value of this swap to the swap bank? 2. Compute the value of this swap to Company X? 3. Compute the value of this swap to Company Y