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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:

Correct Answer: XYZ has a comparative advantage in fixed while ABC has a comparative advantage in floating rates.

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