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Please help me figure out the problem below 4.Consider the following borrowing costs faced by the following 3 companies: Fixed rateFloating rate Company A7.0%LIBOR +
Please help me figure out the problem below
4.Consider the following borrowing costs faced by the following 3 companies:
Fixed rateFloating rate
Company A7.0%LIBOR + 0.1%
Company B6.5%LIBOR 0.1%
Company C7.3%LIBOR + 0.2%
If company A wants to borrow floating-rate funds, what is the lowest possible cost of funds that this company could achieve? Assume that if any two companies enter into the swap transaction, they split the possible savings equally.
Hint: consider all possible ways that company A could borrow floating-rate funds.
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