Floating-Rate Borrowing Assignment | Homework For You

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 here: Fixed-Rate Floating-Rate Borrowing Cost Borrowing Cost Company X 10% LIBOR Company Y 12% LIBOR + 1.5% A swap bank proposes the following interest only swap: X pays swap bank annual payments: $10,000,000 with the coupon rate of LIBOR − 0.15 percent in exchange the swap bank pays to company X interest payments on $10,000,000 at fixed rate of 9.90 percent. Y will pay the swap bank interest payments on $10,000,000 at a fixed rate of 10.30 percent and the swap bank will pay Y annual payments on $10,000,000 with the coupon rate of LIBOR − 0.15 percent.Get Finance homework help today