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Q3. The case shows that the State can borrow at the fixed rate of 7.06% or borrow at the floating rate of JJK - 0.5%.
Q3. The case shows that the State can borrow at the fixed rate of 7.06% or borrow at the floating rate of JJK - 0.5%. Suppose Merrill Lynch can borrow at the fixed rate of 7.26% or borrow at the floating rate of JJK. What is the maximum interest rate gain if two parties enter an interest rate swap? If the State follows Merrill Lynch's SYNTHETIC_M proposal - receives JJK and pays 6.905% to Merrill Lynch - what is the interest rate gain for Merrill Lynch? Draw a swap diagram and explain
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