Question
Companies A and B have been offered the following rates per annum on a $20 million 5-year loan, and a bank, acting as intermediary, will
Companies A and B have been offered the following rates per annum on a $20 million 5-year loan, and a bank, acting as intermediary, will charge 0.20% per annum (20 basis points) to arrange and manage the swap, which appears equally attractive to A and B. Fixed Rate Floating Rate Company A 5.5% LIBOR + 0.20% Company B 6.5% LIBOR + 0.40% Company A requires a floating-rate loan, and company B requires a fixed-rate loan. If Company A pays LIBOR to the bank, and the bank pays LIBOR to Company Y, what rate will Company B pay to the bank? (please enter your answers as percentages, for instance answer 9.0 to indicate 9.0%).
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