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7.12. Companies A and B face the following interest rates (adjusted for the diflerential impact Company A LIBOR + 0.5% of taxes): Company B U.S.

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7.12. Companies A and B face the following interest rates (adjusted for the diflerential impact Company A LIBOR + 0.5% of taxes): Company B U.S. dollars (floating rate) Canadian dollars (fixed rate) LIBOR + 1.0% 6.5% 5.0% Assume that A wants to borrow U.S. dollars at a floating rate of interest and B wants to borrow Canadian doliars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 50-basis-point spread. If the swap is equally attractive to A and B, what rates of interest will A and B end up paying

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