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1. Borrowing costs of two companies, A and B, in the fixed rate and floating rate markets are given below. Company B is a project

1. Borrowing costs of two companies, A and B, in the fixed rate and floating rate markets are given below. Company B is a project and has raised floating-rate funds. It is looking into swapping its floating payment liabilities for fixed rate payment liability to manage its interest rate risk. Company A has raised fixed rate funds and is looking into converting its fixed rate liabilities into floating rate liability. Show how Companies A and B can achieve their objectives including their ability to lower the funding costs though an interest swap deal. 2. A-How does interest rate swap work as a tool for hedging interest rate risk assossiated with project financing? b- borrowing costs of a bank and a project are as follows: Fixed rate market Floating rate market Project 7% Libor + 1% bank 5% Libor + 0.5% 3. A cogeneration project which bought an equipment from a British for

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