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AAA Corp can borrow at a fixed rate of 6.9% and a floating rate of LIBOR 1.25%. BBB can borrow at a fixed rate of
AAA Corp can borrow at a fixed rate of 6.9% and a floating rate of LIBOR 1.25%. BBB can borrow at a fixed rate of 9% and a floating rate of LIBOR +0.25%. If AAA is locked into a loan that pays a fixed rate, but agrees to pay BBB LIBOR in return for 8.5%, what is the new floating rate for AAA? What is the new fixed rate for BBB? How much did each save
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