Question
Companies A and B have been offered the following rates per annum on a $20 million five-year loan: Fixed rate Floating rate Company A 12.0%
Companies A and B have been offered the following rates per annum on a $20 million five-year loan:
|
| Fixed rate | Floating rate |
| Company A | 12.0% | LIBOR + 0.1% |
| Company B | 13.4% | LIBOR + 0.6% |
Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a swap that will appear equally attractive to both companies (that is they split possible savings equally).
Hint: figure out a range for the swap rate.
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The Everything Improve Your Credit Book
Authors: Justin Pritchard
1st Edition
1598691554, 978-1598691559
