Question: 5. Fixed Rate Floating Rate Company A 5.50% LIBOR + 1.05% Company B 6.75% LIBOR + 1.75% Assuming comparative advantage and the agree upon rate

Fixed Rate Floating Rate

Company A 5.50% LIBOR + 1.05%

Company B 6.75% LIBOR + 1.75%

Assuming comparative advantage and the agree upon rate of 6.45%, after entering into an interest rate swap determine the cost of financing for Company A and Company B. Who are the main users of interest swaps and currency swaps?

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