The following statement is to be used in answering questions 1 and 2. Company X, a low-rated firm, desires a fixed-rate, long-term loan. X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR. Its direct borrowing cost is 11% in the fixed-rate bond market. In contrast, company Y, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at 9% and floating-rate funds at LIBOR + 1/4%. Suppose they split the cost savings. Assume there is no banking intermediary and all flows are in USD. 1. How much would X pay for its fixed-rate funds? a) 9.5% b) 10.0% c) 10.5% d) 10.75% 2. How much would y pay net for its floating-rate funds? a) LIBOR - 25% b) LIBOR - 50% c) LIBOR d) LIBOR + .5%