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Fixed Float Amount Company A (Wants Fixed) Company B (Wants Float) Company C (Wants Float) 8% 8% 11% 7% 8% $1,000,000 $600,000 $400,000 10% What is the effective rate for each company if they try to engage in swap transactions?

Fixed Float Amount Company A (Wants Fixed) Company B (Wants Float) Company C (Wants Float) 8% 8% 11% 7% 8% $1,000,000 $600,000 $400,000 10% What is the effective rate for each company if they try to engage in swap transactions?

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
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Fixed Float Amount Company A (Wants Fixed) 8% 7% $1,000,000 Company B (Wants Float) 8% 8% $600,000 Company C (Wants Float) 11% 10% $400,000 What is the effective rate for each company if they try to engage in swap transactions? Assume the following scenario Fixed Float Amount Company A Company B Company C (Wants Fixed) (Wants Float) (Wants Float) 10% 9% 10% 7% 8% $1,000,000 $600,000 10% $600,000 Assume that A&B would share the benefits of a swap evenly with each other. Assumer A&C would split the swap 60-40 in favor of A. What is the effective rate of borrowing for each of the companies after the swaps?
Transcribed Image Text:Fixed Float Amount Company A (Wants Fixed) 8% 7% $1,000,000 Company B (Wants Float) 8% 8% $600,000 Company C (Wants Float) 11% 10% $400,000 What is the effective rate for each company if they try to engage in swap transactions? Assume the following scenario Fixed Float Amount Company A Company B Company C (Wants Fixed) (Wants Float) (Wants Float) 10% 9% 10% 7% 8% $1,000,000 $600,000 10% $600,000 Assume that A&B would share the benefits of a swap evenly with each other. Assumer A&C would split the swap 60-40 in favor of A. What is the effective rate of borrowing for each of the companies after the swaps?
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