Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Company A Company B Fixed Rate 12.0% 13.4% Floating Rate LIBOR + 0.1% LIBOR + 0.6% Company A requires a floating-rate loan; Company B requires a fixed-rate loan. Design a swap that will net a bank acting as intermediary 0.1 percent per annum and be equally attractive to both companies.

Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Company A Company B Fixed Rate 12.0% 13.4% Floating Rate LIBOR + 0.1% LIBOR + 0.6% Company A requires a floating-rate loan; Company B requires a fixed-rate loan. Design a swap that will net a bank acting as intermediary 0.1 percent per annum and be equally attractive to both companies.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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