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  3. company x wants to borrow $10,000,000 floating for

Company X wants to borrow $10,000,000 floating for 5 years, company wants to borrow $10,000,000...

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Company X wants to borrow $10,000,000 floating for 5 years, company wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown below: Company Fixed-Rate Borrowing Cost Floating-Rate Borrowing Cost X 10% LIBOR Y 12% LIBOR +1.5% A swap bank proposes the following interest only swap: Y will pay the swap bank annual payments on $10,000,000 with a fixed rate of 10%. In exchange the swap bank will pay to company interest payments on $10,000,000 at LIBOR -0.15%. What is the value of this swap to company Y? Company will save 15 basis points per year on $10,000,000 - $15,000 per year. O Company Y will only break even on the deal. Company will save 35 basis points per year on $10,000,000 - $35,000 per year. Company Y will save 5 basis points per year on $10,000,000 - $5,000 per year

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