Company A can borrow at 6% or LIBOR +0.2%, and prefers floating-rate borrowing. Company B can...
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Company A can borrow at 6% or LIBOR +0.2%, and prefers floating-rate borrowing. Company B can borrow at 7% or LIBOR +0.6%, and prefers fixed-rate borrowing. You work for company C designing swaps. Please design a swap that will net company C a profit of 0.20% and be equally attractive to both company A and company B. Company A can borrow at 6% or LIBOR +0.2%, and prefers floating-rate borrowing. Company B can borrow at 7% or LIBOR +0.6%, and prefers fixed-rate borrowing. You work for company C designing swaps. Please design a swap that will net company C a profit of 0.20% and be equally attractive to both company A and company B.
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