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conrad136 conrad136
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7 months ago
Company A can issue floating-rate debt at LIBOR + 1%, and it can issue fixed-rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5%, and it can issue fixed-rate debt at 9.4%. Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A. What are the resulting net payments of A and B?


▸

A pays a fixed rate of 9%; B pays LIBOR + 1.5%.



▸

A pays a fixed rate of 8.95%; B pays LIBOR + 1.45%.



▸

A pays LIBOR plus 1%; B pays a fixed rate of 9.4%.



▸

A pays a fixed rate of 7.95%; B pays LIBOR.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
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bolusmachinebolusmachine
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7 months ago
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