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Q7. Observe the annual rates that two firms can obtain on their $10million 5-year investments in the fixed and floating rates markets: Firm Fixed rate

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Q7. Observe the annual rates that two firms can obtain on their $10million 5-year investments in the fixed and floating rates markets: Firm Fixed rate Floating rate M 9% LIBOR 12% LIBOR + 1% Firm M wishes a fixed rate investment, while firm L wishes to receive a floating- rate. Create an indirect swap such that: M and Lincrease the return from their investments by the same amount and SD gains a total of 20 basis points

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