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Finance ABC is currently paying 7.5% fixed rate on S$10m. ABC can borrow at LIBOR. XYZ is paying LIBOR + 0.8% on S$10m. XYZ can borrow fixed at 9.5%. ABC and XYZ agree to swap interest payments to take advantage of the arbitrage created by their respective interest rate differentials. Which of the following is correct? A. ABC ends up paying LIBOR - 0.6%, XYZ ends up paying 8.9% B. ABC ends up paying 7.5%, XYZ ends up paying LIBOR + 0.8% C. ABC ends up paying LIBOR, XYZ ends up paying 9.5% D. None of the above

Finance ABC is currently paying 7.5% fixed rate on S$10m. ABC can borrow at LIBOR. XYZ is paying LIBOR + 0.8% on S$10m. XYZ can borrow fixed at 9.5%. ABC and XYZ agree to swap interest payments to take advantage of the arbitrage created by their respective interest rate differentials. Which of the following is correct? A. ABC ends up paying LIBOR - 0.6%, XYZ ends up paying 8.9% B. ABC ends up paying 7.5%, XYZ ends up paying LIBOR + 0.8% C. ABC ends up paying LIBOR, XYZ ends up paying 9.5% D. None of the above

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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D3) Finance ABC is currently paying 7.5% fixed rate on S$10m. ABC can borrow at LIBOR. XYZ is paying LIBOR + 0.8% on S$10m. XYZ can borrow fixed at 9.5%. ABC and XYZ agree to swap interest payments to take advantage of the arbitrage created by their respective interest rate differentials. Which of the following is correct? A. ABC ends up paying LIBOR - 0.6%, XYZ ends up paying 8.9% B. ABC ends up paying 7.5%, XYZ ends up paying LIBOR + 0.8% C. ABC ends up paying LIBOR, XYZ ends up paying 9.5% D. None of the above
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