Question 11 [6] Company X wishes to borrow funds at a fixed rate of interest. Company Y wishes to borrow at a floating rate of interest. The two companies have been quoted fixed and floating rates per annum as set out in the following table: Company X Company Y Fixed rates 9.5% 9.9% Floating rates LIBOR -0.4% LIBOR +0.4% Design a swap that will net a bank, acting as intermediary, 10 basis points per annum. The swap must be equally attractive to both companies. Question 12 [12] The price of a share is R40. A 1-year European call on the share has strike R50 and costs R5. A 1-year European put on the share has strike R30 and R7. An investor buys 100 shares, shorts 100 calls options and buys 100 put options. Draw a diagram showing the investor's profit or loss against changes in share price over the next year. Draw another diagram in the case where the investor buys 100 shares, shorts 200 call options and buys 200 put options