Fixed rate semi-annual pay debt

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Reference no: EM131300254

Company X has a $ 100 million, 2 year, 6% fixed rate semi-annual pay debt. Payments are actual count over a 360-day year. The company expects interest rates to fall and would prefer to have a floating rate debt. Company Y has a $100 million, two year, floating rate semi-annual pay debt at LIBOR plus 100 basis points. Payments are actual day count over a 360-day year. The company expects interest rates to rise and would like to use a swap to convert the debt to fixed rate. A $100 million, two year 5.5% semi-annual pay swap versus LIBOR plus 125 basis points is available to both X and Y. Demonstrate how each the two can use this swap to achieve its objectives.

Reference no: EM131300254

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