Company P wants a loan of Rs.10 million. Its bankers have told the company that a fixed interest loan can be sanctioned at 10% interest, while a floating interest rate can be sanctioned at the LIBOR + 1 %. Another company Q is also looking for a Rs.10 million loan. Its bankers have given it a quote of 11 % for a fixed interest loan and LIBOR + 3 % for a floating interest loan. 

Explain how the swap can be arranged through financial intermediary which charges 20 basis points

Answer rating: 100% (QA)

SOLUTION A swap can be arranged between Company P and Company Q through a financial intermediary to benefit both parties Here s how it can work Compan View the full answer