X1, X2, X3, ..., x3 =1,2,3....8 Company A and B have been offered the following quarterly compounded rates per annum on a ten-year investment with a principal of $50x: Company Fixed rate (%) Floating rate (basis points over LIBOR) 10(x1+x2) 10xmax(X5, X6) A x1 + x2 xi + max(X5, X6) B I Under the terms of the swap, Company A and B are going to pay and receive payments from the bank four times a year. The quarterly compounded three-month LIBOR rate was x1% per annum on the previous payment date. The average of the bid-offer rate being exchanged for three-month LIBOR in swaps for all maturities is currently (x1 + x)% per annum with continuous compounding. Ignoring day count issues, determine the current value of the swap and the possibility of credit risk associated with the swap to Company A and B if the interest rate swap still has x; months left from today, including today's transactions, if any. Use the forward rate agreement (FRA) approach for Company A and the bond valuation approach for Company B. X1, X2, X3, ..., x3 =1,2,3....8 Company A and B have been offered the following quarterly compounded rates per annum on a ten-year investment with a principal of $50x: Company Fixed rate (%) Floating rate (basis points over LIBOR) 10(x1+x2) 10xmax(X5, X6) A x1 + x2 xi + max(X5, X6) B I Under the terms of the swap, Company A and B are going to pay and receive payments from the bank four times a year. The quarterly compounded three-month LIBOR rate was x1% per annum on the previous payment date. The average of the bid-offer rate being exchanged for three-month LIBOR in swaps for all maturities is currently (x1 + x)% per annum with continuous compounding. Ignoring day count issues, determine the current value of the swap and the possibility of credit risk associated with the swap to Company A and B if the interest rate swap still has x; months left from today, including today's transactions, if any. Use the forward rate agreement (FRA) approach for Company A and the bond valuation approach for Company B