XYZ Ltd holds fixed rate bonds with coupon rate of 7%. ABC Ltd is a recipient of floating rate interest through floating rate bonds with coupons rate of LIBOR + 2%. Both apprehend a fluctuation in interest rate in the coming years. ABC Ltd and XYZ Ltd enter into a swap arrangement through a dealer on the following terms:
- ABC Ltd to pay floating rate interest of LIBOR + 2%
- ABC Ltd to receive from dealer fixed interest of 6.5%
- XYZ ltd to pay a fixed interest of 7%
- XYZ Ltd to receive from the dealer a floating rate of LIBOR + 2%
Show the cash flow position of all the three parties.
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