Question
Companies A and B have been offered the following rates per annum on their business loan: Fixed RateFloating Rate A 10% LIBOR+2% B 14%LIBOR+4% A
Companies A and B have been offered the following rates per annum on their business loan:
Fixed RateFloating Rate
A 10% LIBOR+2%
B 14%LIBOR+4%
A requires a floating rate loan: B requires a fixed rate loan. The Bank is acting as the intermediary, with net 1% per annum in a swap.
- Calculate net gain from a swap that will appear equality attractive to both companies.
- What rate of interest will companies A and B end up paying after the swap? Show calculations in detail.
- Diagrammatically present the swap in a figure.
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The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
