QUESTION 5 A. BAYU Limited and OMBAK Limited are interested in participating in a swap arrangement for their long-term loan that is also currently arranged. MBank, the underwriter for the swap arrangement, wishes to keep a spread of 50 points for the deal. Recently, Rating Agency Malaysia rated BAYU Limited and OMBAK Limited with AA and A rating, respectively. The borrowing rate available for BAYU and OMBAK are: Fixed Rate 8% BAYU Limited Floating Rate LIBOR + 0.50% OMBAK Limited 9.5% LIBOR +0.75% BAYU Limited wants a floating rate loan and at the same time, OMBAK Limited wants a fixed rate. However, it is preferable for BAYU Limited to borrow at a fixed rate and OMBAK Limited at a floating rate. Required: Analyze whether the above swap arrangement will benefit both companies. Show the effective rate that both companies will end up paying based on the arrangement. (7 marks)