7.

Luvia and Paraguas. Livia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Liwia would prefer the flexibility of floating-rate borrowing. while Paraguas wants the security of fixed-rate borrowing. Uluvia is the more croditworthy company. They face the following rate structure, Lluvia, with the beter credit rating. has lower borrowing costs in both types of borrowing. Llwia wants foating-rate debt, so it could borrow at LBOR +1000%. However, 1 could borrow foxed at 9000% and swap for foating-rate debt Paraguas wants fixed-rate debt, so it could borrow fixed at 13,000%. However, it could borrow floating at LiBOR +2000% and swap for fixed-rate debe. What should they do? (LIBOR is 6.000% ) Luvia's comparative advantage is *. (Round to three decimal places)