1 (12) Companies A and B have been offered the following interest rates on $1 million loans Fixed Rate Floating Rate Company A 6 2 LIBOR 1 Company B 8 5 LIBOR 2 A would like to have a floating rate loan and B would like to have a fixed rate loan Design a swap that will provide a 3 payment to the ba...

A will be surely better off and will have competitive advanta ...

1. (12) Companies A and B have been offered the following interest rates on $1 million loans...

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1. (12) Companies A and B have been offered the following interest rates on $1 million loans

	Fixed Rate	Floating Rate
Company A	6.2%	LIBOR + 1%
Company B	8.5%	LIBOR + 2%

A would like to have a floating rate loan and B would like to have a fixed rate loan.

Design a swap that will provide a .3% payment to the bank acting as an intermediary and will be equally attractive to both parties.

Please explain where all the numbers come from?

Related Book For answer-question

Fundamentals of Futures and Options Markets

ISBN: 978-0132993340

8th edition

Authors: John C. Hull

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Posted Date: Dec 30, 2022 07:33 AM

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1. (12) Companies A and B have been offered the following interest rates on $1 million loans...

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Fundamentals of Futures and Options Markets

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