Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years.Their external borrowing opportunities are shown below.
$$\begin{array} { c c c }
& \text { Fixed-Rate Borrowirg } & \text { Floating-Rate BorTownre } \
&\text { Cost } & \text { Cost } \
\text { Compary X } & 10 \% & \text { LIBOR } \
\text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \%
\end{array}$$ A swap bank is involved and quotes the following rates five-year dollar interest rate swaps at 10.05 percent -10.45 percent against LIBOR flat.
Assume company Y has agreed,but company X will only agree to the swap if the bank offers better terms.
What are the absolute best terms the bank can offer X,given that it already booked Y?
A)10.45% ?10.45% against LIBOR flat.
B)10.45%?10.05% against LIBOR flat.
C)10.50%?10.50% against LIBOR flat.
D)none of the options

Question

Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years.Their external borrowing opportunities are shown below. 
$$\begin{array} { c c c } 
& \text { Fixed-Rate Borrowirg } & \text { Floating-Rate BorTownre } \
&\text { Cost } & \text {  Cost } \
\text { Compary X } & 10 \% & \text { LIBOR } \
\text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \%
\end{array}$$ A swap bank is involved and quotes the following rates five-year dollar interest rate swaps at 10.05 percent -10.45 percent against LIBOR flat.
Assume company Y has agreed,but company X will only agree to the swap if the bank offers better terms.
What are the absolute best terms the bank can offer X,given that it already booked Y? 
A)10.45% ?10.45% against LIBOR flat. 
B)10.45%?10.05% against LIBOR flat. 
C)10.50%?10.50% against LIBOR flat. 
D)none of the options

Quizplus · Accepted Answer

The Answer of Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years.Their external borrowing opportunities are shown below. 
$$\begin{array} { c c c } 
& \text { Fixed-Rate Borrowirg } & \text { Floating-Rate BorTownre } \
&\text { Cost } & \text {  Cost } \
\text { Compary X } & 10 \% & \text { LIBOR } \
\text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \%
\end{array}$$ A swap bank is involved and quotes the following rates five-year dollar interest rate swaps at 10.05 percent -10.45 percent against LIBOR flat.
Assume company Y has agreed,but company X will only agree to the swap if the bank offers better terms.
What are the absolute best terms the bank can offer X,given that it already booked Y? 
A)10.45% ?10.45% against LIBOR flat. 
B)10.45%?10.05% against LIBOR flat. 
C)10.50%?10.50% against LIBOR flat. 
D)none of the options

Company X Wants to Borrow $10,000,000 Floating for 5 Years;