Question: Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%. Company B can issue floating-rate debt at
Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR +1.5% and can issue fixed-rate debt at 9.4% Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap. A will make a fixed 7 95% payment to B and B will make a floating-rate payment equal to LIBOR to A. What are the resulting net payments of A and B? a. A pays a fixed rate of 9%, B pays LIBOR + 1.5%. Ob A pays a fixed rate of 8.95%, B pays LIBOR - 1.45% O c A pays LIBOR plus 1%, B pays a fixed rate of 9.4% Od A pays a fixed rate of 7 95%, B pays LIBOR Oe. None of the above answers is correct. w
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