b) Suppose you are employed in a major bank in the treasury division. Two companies...
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b) Suppose you are employed in a major bank in the treasury division. Two companies have approached the bank each seeking to enter into a $50 million intermediated interest rate swap. You have ascertained the following information in relation to the borrowing capacity of each company: + Debt Market Company Y Company X 3.75% 2.40% Fixed-rate funds Floating-rate funds BBSW+0.55% BBSW+0.20% You construct a swap that will benefit all parties based on the following conditions: The bank must obtain a spread of 0.05% from each party to the intermediated swap. Company X must achieve a gain of 0.3% from the swap. . Required: Present your offer to the companies, indicating the cash flows to each party for the swap. Show that the swap satisfies the conditions presented above. Show all working. Use dot points where necessary
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