(Following Rates are Quoted) Company A Company B Credit Rating A B Fixed Rate 6% 8% Floating Rate LIBOR+1% LIBOR+1.5% Which company has a relative advantage and in which market? Which company has an absolute advantage and in which market Company A wants to borrow floating. Company B wants to borrow fix. Build a proper SWAP that benefit the two companies.
(Following Rates are Quoted) Company A Company B Credit Rating A B Fixed Rate 6% 8% Floating Rate LIBOR+1% LIBOR+1.5% Which company has a relative advantage and in which market? Which company has an absolute advantage and in which market Company A wants to borrow floating. Company B wants to borrow fix. Build a proper SWAP that benefit the two companies.
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
Problem 1PS
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Question
(Following Rates are Quoted)
|
|
Company A |
Company B |
|
Credit Rating |
A |
B |
|
Fixed Rate |
6% |
8% |
|
Floating Rate |
LIBOR+1% |
LIBOR+1.5% |
- Which company has a relative advantage and in which market?
- Which company has an absolute advantage and in which market
- Company A wants to borrow floating. Company B wants to borrow fix. Build a proper SWAP that benefit the two companies.
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