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1. Wall company and Table company need to raise funds for capital improvements at their manufacturing plants. Wall company can borrow funds either at an
1. Wall company and Table company need to raise funds for capital improvements at their manufacturing plants. Wall company can borrow funds either at an 8 percent fixed rate or at SBI +2 percent floating rate. Table company can borrow funds at the debt market either at a 11 percent fixed rate or at SBI+1 percent floating rate. a. Is there an opportunity here for Wall and Table company to do interest rate swap? Explain! b. Suppose the dealer in the swaps market demand 2 percent of profit, describe how these two company can do interest rate swap! Use diagram to expalain your answer! 2. NECE company and KBC company need to raise funds for capital improvements at their manufacturing plants. NECE company can borrow funds either at an 5 percent fixed rate or at EURIBOR+2 percent floating rate. KBC company can borrow funds at the debt market either at a 8 percent fixed rate or at EURIBOR +1 percent floating rate. a. Is there an opportunity here for NECE and KBC company to do interest rate swap? Explain! b. Suppose the dealer in the swaps market demand 2 percent of profit, describe how these two company can do interest rate swap! Use diagram to expalain your
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