Question $2$

Company $x$ wants to borrow $$10,000,000$ floating for $5$ years; Company $Y$ wants to borrow $$10,000,000$

fixed for $5$ years. Their external borrowing opportunities are shown below:

A swap bank proposes the following interest only swap:

$x$ will pay the swap bank annual payments on $$10,000,000$ with the coupon rate of LIBOR; in exchange the

swap bank will pay to company $x$ interest payments on $$10,000,000$ at a fixed rate of $4\mathrm{.}25\%.$ Y will pay the

swap bank interest payments on $$10,000,000$ at a fixed rate of $5\%$ and the swap bank will pay $Y$ annual

payments on $$10,000,000$ with the coupon rate of LIBOR $+\mathrm{.}5\%.$

What is the value of this swap to Company $x$ in basis points? $($show work please$)$