Question 19

QUESTION 19 Below is a table of the fixed and floating rates at which ABC plc and XYZ plc can borrow. ABC plc is a large company requiring floating rate debt, while XYZ plc is a medium-sized company requiring fixed rate debt. Fixed Floating ABC plc 5.3% LIBOR - 1% XYZ 11.1% LIBOR + 1% If a bank arranges an interest rate swap for a joint fee of 1%, and the remaining benefit is split equally between ABC plc and XYZ plc, what will be the post-swap interest rates paid by the two companies