Companies A and B has been offered the following rates per annum on a $20 million five-
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Company A 5.0% LIBOR + 0.1%
Company B 6.4% 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% per annum and that will appear equally attractive to both companies.
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A has an apparent comparative advantage in fixedrate markets but w...View the full answer
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