Nissan and Puma both have USD75million debt outstanding with a maturity of 3 years. To reduce their financing risks, Nissan would like to borrow fixed USD-denominated debt which it can but for 5.50%. Nissan is currently borrowing floating USD-denominated debt at LIBOR+0.5%. Meanwhile Puma is currently paying 4.50% p.a and would like floating USD-denominated debt which it can obtain at LIBOR+0.1%.

Citigroup has proposed to arrange a swap for the two parties and will charge 20 basis points of the total savings available. The balance of the savings will be split equally between the two MCs. The total savings available from the swap is

basis points. The fixed rate paid

to Citigroup within the swap is

and the net cost to Puma from the swap arrangement is

O a. 60, 4.90%, LIBOR - 0.1%

O b. 140, 5.50%, LIBOR - 0.5%

O c. 40, 4.90%, LIBOR - 0.1%

O d. 120, 5.30%, LIBOR - 0.5%

O e. None of the options in this question are correct

Answer rating: 100% (QA)

Analyzing the NissanPuma Swap Proposal Assumptions Both loans are for USD 75 million and have a 3year maturity Citigroups fee is 20 basis points of th... View the full answer