Use the following information for the problem

Bank E: Bank E is an international bank located in Germany. It wants to raise $100,000,000 to finance floating-rate Eurodollars loans. Bank E currently has 15-year fixedrate Eurodollar bonds at 8 percent. It wishes to finance its floating-rate Eurodollar loans with floatingrate notes at LIBOR (London Interbank Offer Rate).

Firm F: Firm F is a U.S. company. It needs $100,000,000 to finance an investment with a 15-year economic life. Firm F has 5-year floating-rate notes at LIBOR + 1 percent. Firm F would prefer to borrow at a fixed rate.

Below are the borrowing opportunities of Bank E and Firm F without a swap bank.

	Firm F	Bank E
Fixed rate	12.0%	8.0%
Floating rate	LIBOR + 1%	LIBOR

The swap bank, acting an intermediary for Bank E and Firm F, makes the following offer to Bank E. Bank E pays the swap bank LIBOR 0.50% per year on $100,000,000 for 15 years and the swap bank will pay Bank E 8.5% on $100,000,000 for 15 years.

The swap bank makes the following offer to Firm F. Firm F pays the swap bank 9.0 percent per year on $100,000,000 for 15 years and the swap bank will pay Firm F LIBOR 1% per year on $100,000,000 for 15 years.

Bank ELIBOR 0.50%Swap BankLIBOR1% Firm F

Firm F9.0%Swap Bank8.5%Bank E

Compute the annual cost savings from the swap bank offers to Bank E and Firm F. Also calculate the annual cash flow to the swap bank. Ignore the time value of money of the cash flows.