Question: Right answer is b, please provide solution and explain everything in details Two companies have access to the following deposit offers in the market. Company
Right answer is b, please provide solution and explain everything in details
Two companies have access to the following deposit offers in the market. Company A - 6% at a fixed rate and LIBOR - 0.1% at a floating rate; Company B
- 5.4% at a fixed rate and LIBOR - 0.3% at a floating rate. The nominal amount of the contract is EUR 10 million. What is the nominal amount of money that Company A can gain if it decides to enter into a swap with Company B (without an intermediary) and Company B gains 0.15% of the nominal value of the swap?
Also, at what interest rate must Company A place the deposit on the market (floating or fixed)?
- 25000 EUR and Company A places the deposit on the market at floating interest rate.
- 25000 EUR and Company A places the deposit on the market at fixed interest rate.
C) 40000 EUR and Company A places the deposit on the market at floating interest rate.
d) 40000 EUR and Company A places the deposit on the market at fixed interest rate.
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