Question
Companies AAA and BBB have been offered rates on a $40 million 5-year loan: Firm Fixed Floating AAA 6.0% LIBOR + 0.2% BBB 6.7% LIBOR
Companies AAA and BBB have been offered rates on a $40 million 5-year loan:
| Firm | Fixed | Floating |
| AAA | 6.0% | LIBOR + 0.2% |
| BBB | 6.7% | LIBOR + 0.4% |
Suppose AAA wants floating and BBB wants fixed. Design a swap that is equally attractive to both firms and yields a financial intermediary 0.04%. In the swap, the floating leg is LIBOR flat. What does Firm BBB pay to the financial intermediary under the swap? Please report your answer in percentage. For instance, 5.34% would be written as 5.34.
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Understanding Cross Cultural Management
Authors: Marie Joelle Browaeys, Roger Price
3rd Edition
1292015896, 978-1292015897
