Question: Design an IRS - interest rate swap that can create comparative advantages for each firm. Assume the broker of this IRS commission fee = 20bps

Design an IRS - interest rate swap that can create comparative advantages for each firm. Assume the broker of this IRS commission fee = 20bps

Firm A borrows @ Firm B borrows @
Fix rate: current cash rate + 100bps Fix rate: current cash rate + 180bps
Floating rate: LIBOR + 150bps Floating rate: LIBOR + 300bps

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