Question: This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee.

Companies A and B have been offered the following rates per annum on a $20M five-year loan. Company A requires a floating-rate loan. Company B requires a fixed rate loan. Design a swap that will appear equally attractive to both parties (split any gains from the swap right down the middle). Remember that the intermediary will take a 0.3% intermediation fee.

Fixed Rate Floating Rate
Company A 4.6% LIBOR + 0.2%
Company B 6.8% LIBOR + 0.9%

After the swap you designed, at what fixed rate of interest does Company B borrow?

(Enter 11.51% as 0.1151. Required precision: 0.0001 +/- 0.0001)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

On December 31, Pacifica, Inc., acqulred 100 percent of the voting stock of Seguros Company. Pacifica will malntain Seguros as a wholly owned subsldlary with its own legal and accounting identity....

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set - up as before, but now we have an intermediary who charges a 0 . 3 % intermediation fee. Companies A and B have been...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3% intermediation fee. Companies A and B have been offered...

Q:

How to get the answer of 0.0595? Thank you so much!!! This question is a slight variation of the above problem. It's the same set-up as before, but now we have an intermediary who charges a 0.3%...

Q:

Use the story about the electricity market in California to answer Question 1 1) Apply supply-demand analysis and elasticity, and compose a short write-up to explain the volatility of electricity...

Q:

Q. How cyber attacks does affect stock transport order(STO) business, which is facilitated by blockchain technology ? Q. Write an executive summary on white spot company and the problems regarding...

Q:

Develop a chase aggregate plan using hires and fires to adjust the capacity for Draper. All demand must be met each period. (a) Show what would happen if this plan were implemented. (b) Calculate the...

Q:

Portfolio manager, Kris Gaines, needs to develop an investment portfolio for their conservative clients. Their task is to determine the proportion of the portfolio to invest in each of the five...

Q:

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...