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: Design a mutually beneficial interest only swap for X and Y with a notational principal of $10 million by having appropriate values for A = Company X's external borrowing rate
B = Company Y's payment to X (rate)
C = Company X's payment to Y (rate)
D = Company Y's external borrowing rate
A)Option A
B)Option B
C)Option C
D)Option D

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:  Design a mutually beneficial interest only swap for X and Y with a notational principal of $10 million by having appropriate values for A = Company X's external borrowing rate
B = Company Y's payment to X (rate)
C = Company X's payment to Y (rate)
D = Company Y's external borrowing rate  
A)Option A 
B)Option B 
C)Option C 
D)Option D

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:  Design a mutually beneficial interest only swap for X and Y with a notational principal of $10 million by having appropriate values for A = Company X's external borrowing rate
B = Company Y's payment to X (rate)
C = Company X's payment to Y (rate)
D = Company Y's external borrowing rate  
A)Option A 
B)Option B 
C)Option C 
D)Option D

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