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6) Companies A and B face the following interest rates (adjusted for the differential impact of taxes): US Dollars (loating rate) Canadian dollars (fixed rate)

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6) Companies A and B face the following interest rates (adjusted for the differential impact of taxes): US Dollars (loating rate) Canadian dollars (fixed rate) 5.5%- LIBOR+10% LIBOR+0.5% Assume that A wants to borrow U.S. dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate of interest A financial institution is planning to arrange a swap and requires a 40- basis-point spread. (NOTE: follow the Swap Case Study 2 problem) a Which company has the comparative advantage in the Canadian dollar fixed-rate market? (s points)-company b. Which company has the comparative advantage in the U.S. dollar floating-rate market? (6 points) Company c What is the Total Potential Gain to all parties? (5 points) d What is Net Gain for each company (excluding the financial institution fee)? (5 points) Ask me anything One 80o

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