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Health Services Ltd (HS) and Bonjour Inc (BI) both need to borrow $1 million to purchase new computer systems. HS can borrow fixed-interest-rate funds at
Health Services Ltd (HS) and Bonjour Inc (BI) both need to borrow $1 million to purchase new computer systems. HS can borrow fixed-interest-rate funds at 8 percent or variable-rate funds at the LIBOR plus 0.5% in the debt market. BI incurs higher costs of borrowing which are a fixed rate of 11 percent and a variable rate of LIBOR plus 2%. Identify the best swap arrangement between HS and Bl and label the graph below accordingly, given that both are sharing savings on the cost of borrowing equally and there is no intermediary. Label the graph below and show all calculations leading to your conclusions. B D A Company HS Company BI Company HS Company BI Fixed Rate E G Floating Rate F H Health Services Ltd (HS) and Bonjour Inc (BI) both need to borrow $1 million to purchase new computer systems. HS can borrow fixed-interest-rate funds at 8 percent or variable-rate funds at the LIBOR plus 0.5% in the debt market. BI incurs higher costs of borrowing which are a fixed rate of 11 percent and a variable rate of LIBOR plus 2%. Identify the best swap arrangement between HS and Bl and label the graph below accordingly, given that both are sharing savings on the cost of borrowing equally and there is no intermediary. Label the graph below and show all calculations leading to your conclusions. B D A Company HS Company BI Company HS Company BI Fixed Rate E G Floating Rate F H
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