Companies A and B face the following interest rates (adjusted for the differential impact of taxes): Assume
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Assume that A wants to borrow U.S. dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 50-basis-point spread. If the swap is equally attractive to A and B, what rates of interest will A and B end up paying?
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Company A has a comparative advantage in the Canadian dollar fixedrate market Company B has a compar...View the full answer
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