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)

Question

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)

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Question

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.

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