Question
Company A and Company B both want to borrow 1,000,000 for three years. A wants borrow floating and B wants to borrow fixed. A and
Company A and Company B both want to borrow 1,000,000 for three years. A wants borrow floating and B wants to borrow fixed. A and B agree to equally split the cost savings. What are the borrowing costs after swap?
| Fixed Rate | Floating Rate | |
| Borrowing Cost | Borrowing Cost | |
| Company A | 10% | LIBOR |
| Company B | 12% | LIBOR + 1.5% |
| a. | A: LIBOR - 0.25%; B: 11.75% | |
| b. | None of these options | |
| c. | A: LIBOR; B: 11.5% | |
| d. | A: LIBOR - 0.5%; B:12% |
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Investments Analysis And Management
Authors: Charles Jones, Nick Jones
11th Edition
0470477121, 9780470477120
