Question
1. (12) Companies A and B have been offered the following interest rates on $1 million loans Fixed Rate Floating Rate Company A 6.2% LIBOR
1. (12) Companies A and B have been offered the following interest rates on $1 million loans
Fixed Rate | Floating Rate | |
Company A | 6.2% | LIBOR + 1% |
Company B | 8.5% | LIBOR + 2% |
A would like to have a floating rate loan and B would like to have a fixed rate loan.
Design a swap that will provide a .3% payment to the bank acting as an intermediary and will be equally attractive to both parties.
Please explain where all the numbers come from?
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
