1. Companies A and B have been offered the following rates per annum on a $10 m

1. Companies A and B have been offered the following rates per annum on a $10 million 5-year investment:Company A requires (desires to receive) a fixed-rate on its investment but currently is receiving float; company B requires (desires to receive) a
floating rate on its investment but is getting fixed rate. You are ask to design a swap that will net a bank acting as intermediary 0.2% per annum and the
swap will be equally attractive to A and B enabling them to get the desired rates. Which of the following you recommend?
Answer Let B receives 10.8% fixed on its investment pay 10.5% fix to bank bank pay 10.3% to A. Let A receive LIBOR for its
investment pay that LIBOR to the bank and bank to pay B the LIBOR received from A. Let B receives 10.8% fixed on its investment pay 10.4% fix to bank bank pay 10.2% to A. Let A receive LIBOR for its
investment pay that LIBOR-0.1% to bank and bank passes the LIBOR-0.1% to B. (a) and (b) None of the above