Question
Carter Enterprises can issue floating rate debt at Libor +2% or fixed rate debt at 10%. Brence manufacturing can issue floating rate debt at libor
Carter Enterprises can issue floating rate debt at Libor +2% or fixed rate debt at 10%. Brence manufacturing can issue floating rate debt at libor +3.1% or fixed rate debt at 11%. suppose carter issues floating rate debt and Brence issues fixed rate debt. they are considerinf a swap in which carter makes a fixed rate payment of 7.95% to brence and brence makes payment of Libor to carter. what are the net payment of carter and brence if they engage in the swap? would carter be better off if it issued fixed rate debt or if it issued fixed rate and engage in the swap? explain answer f
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