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QUESTION 37 B needs $10,000 at a fixed rate for 1 year. Their borrowing costs...

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QUESTION 37 B needs $10,000 at a fixed rate for 1 year. Their borrowing costs are shown here: Company A wants needs $10,000 at a floating rate for 1 year company Fixed-Rate Floating Rate Borrowing Cost Borrowing Cost Company A 10% LIBOR Company B 12% LIBOR - 1.5% A swap bank proposes the following interest only swap: Company A will pay the swap bank annual payments on $10,000 with the coupon rate of LIBOR -0.15 percent; in exchange the swap bank will pay to Company A interest payments on $10,000 at a fixed rate of 9.90 percent. What is the value of this swap to Company A? Company A will only break even on the deal, Company A will save 25 basis points per year on $10,000,000 - $25,000 per year. Company A will save 5 basis points per year on $10,000,000 = 55,000 per year. Company A will lose money on deal

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