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Companies A and B want to borrow 100 million each (they want to issue debt) for 10 years. The market offers them the following alternatives
Companies A and B want to borrow 100 million each (they want to issue debt) for 10 years. The market offers them the following alternatives (Symbol for floating rate: L). Company A) Floating rate: L + 1%, Fix rate: 3.0%. Company B) Floating rate: L + 4%, Fix rate: 7.5%. A financial institution arranges a swap and charges 50 basis points per year. If the swap is organized so that it is equally attractive to both companies: What net rate of interest will B end up paying
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