Question 13 Refer to the following table. Xanadu Oil Corporation just secured a fixed interest rate loan at 5% and Rex Technologies just secured a loan at LIBOR-1%. Now the two companies want to enter into an interest rate swap agreement where Xanadu wants to make payments at a floating rate and receive payments at a fixed rate. Rex wants to do the opposite. What are their expectations of interest rates in the future? Interest Rate Swaps Xanadu Oil Corporation Rex Technologies BBB AAA Credit Rating Fixed rate cost of borrowing Floating rate cost of borrowing 5% 7% LIBOR +0.5% LIBOR 1.096 c Both companies are expecting interest rates to rise Rex is expecting interest rates to fall so it wants the flexibility of floating interest rates Xanadu is expecting interest rates to rise so it wants the security of fixed interest rate Xanadu is expecting interest rates to fall so it wants the security of fixed interest rate I Rex is expecting interest rates to rise so it wants the security of fixed interest rate