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30. ABC Company and XYZ Company need to raise funds to pay for capital improvements at their manufacturing plants. ABC Company can borrow funds
30. ABC Company and XYZ Company need to raise funds to pay for capital improvements at their manufacturing plants. ABC Company can borrow funds either at 8% fixed or LIBOR + 1% floating rate. XYZ Company can borrow funds either at 9.5% percent fixed rate or at LIBOR + 0.5% floating rate. Company ABC prefers floating but has issued fixed rate bonds. Company XYZ prefers fixed loans but have borrowed at floating rate. You can bring these two companies together in an interest rate swap where: A. net payment for ABC will be LIBOR + 1% and for XYZ will be 9.5% while you make 1.5% as a swap dealer. slids 122 -ture 8. B. net payment for ABC will be LIBOR + 0.5% and for XYZ will be 9% while you make 0.5% as a swap dealer. C. net payment for ABC will be LIBOR and for XYZ will be 9% while you make 0.5% as a swap dealer. D. net payment for ABC will be LIBOR and for XYZ will be 9% while you make 1.5% as a swap dealer. E. No profitable swap deal is possible in this situation.
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