20. Companies A and B have been offered the following rates per annum on a $50...
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20. Companies A and B have been offered the following rates per annum on a $50 million five-year loan: Fixed Rate Floating Rate Company A 5.5% SOFR Company B 7.0% SOFR + 0.5% Which of the following is true? A. Company A has a comparative advantage in the floating rate market. B. Company B is a comparative advantage in the fixed-rate market. C. If companies A and B agree to enter an interest rate swap arranged by a bank for a fee of 0.2%, then the total gain will be 0.8% D. A and B can split a total gain of 2% if they agree bilaterally on entering an equally attractive swap. Answer: C 20. Companies A and B have been offered the following rates per annum on a $50 million five-year loan: Fixed Rate Floating Rate Company A 5.5% SOFR Company B 7.0% SOFR + 0.5% Which of the following is true? A. Company A has a comparative advantage in the floating rate market. B. Company B is a comparative advantage in the fixed-rate market. C. If companies A and B agree to enter an interest rate swap arranged by a bank for a fee of 0.2%, then the total gain will be 0.8% D. A and B can split a total gain of 2% if they agree bilaterally on entering an equally attractive swap. Answer: C
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