Problem 8 (2 points) : Both ABC and XYZ want to borrow $1,000,000 for 10 years. ABC wants to borrow at a fixed interest rate while XYZ wants to borrow at a floating interest rate. The firms face the following annual borrowing interest rates:

Assume that in the proposed swap ABC and XYZ exchange a floating rate of LIBOR for a fixed rate of x%. Find the range of the possible values of x so that both companies would be willing to engage in a swap agreement.

ABC XYZ Fixed 5.2% 5.8% Floating LIBOR +1.5% LIBOR+2.5% ABC XYZ Fixed 5.2% 5.8% Floating LIBOR +1.5% LIBOR+2.5%