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A Dublin based corporate treasurer tells you that she has just negotiated a five-year loan at a competitive fixed rate of interest of 3.2%. The

A Dublin based corporate treasurer tells you that she has just negotiated a five-year loan at a competitive fixed rate of interest of 3.2%. The treasurer explains that she achieved the 3.2% rate by borrowing at six-month LIBOR plus 150 basis points and swapping LIBOR for 1.7%. She goes on to say that this was possible because her company has a comparative advantage in the floating-rate market.

Explain briefly what issue the treasurer has overlooked.

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