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QUESTION 2 Companies X and Y have been offered the following rates per annum Fixed Rate a $5 million 10-year investment: Floating Rate LIBOR 7.0%

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QUESTION 2 Companies X and Y have been offered the following rates per annum Fixed Rate a $5 million 10-year investment: Floating Rate LIBOR 7.0% Company X Company Y 7.7% LIBOR Company X requires a fixed-rate investment; company Y requires a floating-rate investment. Design a swap that will net a bank, acting as intermediary, 0.1% per annum and will appear equally attractive to X and Y. The swap arrangement below. A. B. Bank D. F. > X Y C. E. A. is B. is C. is D. is E. is F. is

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