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e. Groupe Kutana Ltd is AAA-rated international company located in the Ghana that wishes raise $10,000,000 to finance floating-rate Eurodollar loans. Groupe Kutana is considering
e. Groupe Kutana Ltd is AAA-rated international company located in the Ghana that wishes raise $10,000,000 to finance floating-rate Eurodollar loans. Groupe Kutana is considering issuing 5-year fixed-rate Eurodollar bonds at 10 percent. It would make more sense for the company to issue floating-rate notes at LIBOR to finance the floating-rate Eurodollar loans. Oga Kwatakwata Ltd is a BBB-rated Nigerian company. It needs $10,000,000 to finance an investment with a five- year economic life, and it would prefer to borrow at a fixed rate. Oga Kwatakwata is considering issuing 5-year fixed-rate Eurodollar bonds at 11.75 percent. Alternatively, Oga Kwatakwata can raise tle money by issuing 5-year floating rate notes at LIBOR + percent. Finn B would prefer to borrow at a fixed rate. If the two firms decide to enter into swap agreement in which the swap bank is taking 20% of the potential savings ) Calculate the quality spread differential (QSD) n)What rate can each firm borow in their respective financing option
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