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Suppose firm ABC has access to fixed rate 7.5%, and floating rate of LIBOR + 1.5%, while XYZ had access to fixed rate 6% and
Suppose firm ABC has access to fixed rate 7.5%, and floating rate of LIBOR + 1.5%, while XYZ had access to fixed rate 6% and floating rate LIBOR + 0.5%. For these two firms: If a swap would work, and if we ignore the cut to a swap dealer (assume his services are free), the total amount both firms combined could gain is: | |||||
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