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Companies A and B have been offered the following rates. Company A requires a floating-rate...

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Finance

Companies A and B have been offered the following rates. Company A requires a floating-rate loan. Company B requires a fixed rate loan. Design a swap that will appear equally attractive to both parties (split any gains from the swap right down the middle).

Fixed Rate Floating Rate
Company A 4.5% LIBOR + 0.2%
Company B 6.5% LIBOR + 0.9%

A diagram of the swap is shown above. What is the value of X (the fixed payment that company B makes to Company A) in the swap you designed?

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