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Companies A and B want to borrow 10 million each (they want to issue debt) for 5 years. The market offers them the following alternatives
Companies A and B want to borrow 10 million each (they want to issue debt) for 5 years. The market offers them the following alternatives (Symbol for floating rate: L). Company A) Floating rate: L + 0.5%, Fix rate: 2.0%. Company B) Floating rate: L + 1.0%, Fix rate: 3.6%. A financial institution arranges a swap and charges 10 basis points (0.1%) per year. If the swap is organized so that it is equally attractive to both companies: What is the final cost in terms of interest rate for company A? Select one: a. 2.0% b. L + 1.0% c. 1.5% d. L + 0.5% e. L f. 3.0%
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