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Companies A and B want to borrow 10 million each (they want to issue debt) for 3 years. The market offers them the following alternatives
Companies A and B want to borrow 10 million each (they want to issue debt) for 3 years. The market offers them the following alternatives (Symbol for floating rate: L). Company A) Floating rate: L + 1.5%, Fix rate: 2.0%. Company B) Floating rate: L + 3.0%, Fix rate: 5.0%. A financial institution arranges a swap and charges 50 basis points (0.5%) per year. If the swap is organized so that it is equally attractive to both companies: What is the net rate of interest that will end up paying company A
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