Construct a swap that is equally attractive to Martial International Inc and Mo International Inc. and show the rates of interest they will end up paying
You are the corporate treasurer of Martial International Inc. Your firm rated as AAA, is able to raise capital in US dollars at floating rate of LIBOR+0.5% or Canadian dollars at 5.5% flat. However, Mo International ltd, with a rating of A, is only able to raise the capital in US dollar at floating rate of LIBOR +0.75% or in Canadian Dollars at a fixed rate of 6.75%.
Assume that Martial International Inc wants to borrow US dollars at a floating rate of interest and Mo International ltd wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 30-basispoint spread.
Construct a swap that is equally attractive to Martial International Inc
and Mo International Inc. and show the rates of interest they will end up paying.
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