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Rollins Corp can obtain a fixed rate loan at 7.10% and a floating loan at LIBOR +0.5%. Peterson Ltd. can obtain a fixed rate loan
Rollins Corp can obtain a fixed rate loan at 7.10% and a floating loan at LIBOR +0.5%. Peterson Ltd. can obtain a fixed rate loan at 9.5% and a floating rate loan at LIBOR +2%. Rollins desires a floating rate loan while Peterson desires a fixed rate loan. Assume that the fixed swap rate is 7.05% Required: (a) Use the diagram below to show how an interest rate swap benefiting both parties could be structured. 17 Marks) (b) How much in annual interest (95) does each party save as a result of the swap
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