Let's assume Letshego ML wants to borrow at floating rate and Postfin wants to borrow at...
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Let's assume Letshego ML wants to borrow at floating rate and Postfin wants to borrow at fixed rate of interest. The two companies have been offered the following rates: Company Name Letshego ML Postfin Fixed Rate 12% 15.5% Floating Rate 6 Months LIBOR+3% 6 Months LIBOR+4.5% The gain from the swap will be equally distributed to the two companies. Bank Windhoek agrees to facilitate the swap for a fee of 30 basis points. What swap can be designed? What is the benefit for each company? What are swaps and how can they be used practically by a Derivatives Portfolio Manager? Let's assume Letshego ML wants to borrow at floating rate and Postfin wants to borrow at fixed rate of interest. The two companies have been offered the following rates: Company Name Letshego ML Postfin Fixed Rate 12% 15.5% Floating Rate 6 Months LIBOR+3% 6 Months LIBOR+4.5% The gain from the swap will be equally distributed to the two companies. Bank Windhoek agrees to facilitate the swap for a fee of 30 basis points. What swap can be designed? What is the benefit for each company? What are swaps and how can they be used practically by a Derivatives Portfolio Manager?
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A plain vanilla interest rate swap can be designed where Letshego ML pays a fixed rate of 12 to Post... View the full answer
Related Book For
Corporate Finance Principles And Practice
ISBN: 9781292450940
9th Edition
Authors: Denzil Watson, Antony Head
Posted Date:
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