Company X and Company Y have been offered the following rates. Fixed Rates: Company X=3.5%; Company Y=4.5%; Floating Rat

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Company X And Company Y Have Been Offered The Following Rates Fixed Rates Company X 3 5 Company Y 4 5 Floating Rat 1 (70.45 KiB) Viewed 46 times

Company X and Company Y have been offered the following rates. Fixed Rates: Company X=3.5%; Company Y=4.5%; Floating Rates: Company X=3 month LIBOR+0.1%; Company Y=3 month LIBOR +0.3% Suppose that Company X borrows fixed and company Y borrows floating, and each enters into an interest rate swap with a swap dealer, so that the swap dealer receives 0.2% of the gain and the remaining gain is shared between X and Y equally. Assume that the floating rate on each of the swaps with the swap dealer is the LIBOR rate. Which of the following is correct, regarding the fixed rates on the interest swaps with the swap dealer? O a. X should pay 3.7% to the swap dealer and Y should receive 3.9% from the swap dealer Ob. X should receive 3.4% from the swap dealer and Y should pay 3.6% to the swap dealer. OC. X should receive 3.7% from the swap dealer and Y should pay 3.9% to the swap dealer.