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Consider the following information for an interest rate swap contract between companies A and B. Company A can borrow from a bank at 8% fixed
Consider the following information for an interest rate swap contract between companies A and B.
- Company A can borrow from a bank at 8% fixed or LIBOR + 1% floating (borrows fixed)
- Company B can borrow from a bank at 9.6% fixed or LIBOR + 1.5% (borrows floating)
- Company A prefers floating, and Company B prefers fixed.
From this information, in which interest rate market Company B has comparative advantage and why?
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Money Locates You
Authors: Joan Ekobena
1st Edition
1774821257, 978-1774821251
