Problem 3-SWAP: (20 marks) 1. Firm A and Firm B want to construct a swap and have approached the bank to enter into a $10 million intermediated interest rate swap. The data below show the rate at which firms A and B are able to invest in the fixed and floating-rate debt markets: (15 marks) Debt Markets Fixed-rate funds Floating-rate funds Firm A 10% BBSW + 1.3% Firm B 11.80% BBSW + 0.5% Construct a swap that will benefit all parties based on the following conditions: Bank will acquire a fee of 0.5% per cent; the beneficial gains will be allocated 40% to firm A and 60% to firm B. ction 2: Use a fully labeled diagrammatic representation to present the construction and cash flows of the intermediated swap. (In your answer should show: comparative advantages, circumstance that firm wish to enter into swap; gains for each firms; result after swap....) 2. Esterist Company purchases supplies from Russia once a year. Would Esterist be favorably affected if it establishes a currency swap arrangement and the dollar strengthens? What if it establishes a currency swap arrangement and the dollar generally weakens