Suppose firm Alpha can borrow either at 6% or Libor + 1% and firm Beta borrow either at 8% or Libor + 2%. Assume that there is a swap bank who is willing to distribute any benefit by keeping 1/5th to itself, and 2/5th each to Alpha and Beta. Which of the following is false based on the above information?

Alpha is going to receive 5.8% from the swap bank for Libor.

Betas borrowing net borrowing rate is 7.6% after the swap arrangement.

Beta is going to pay 5.6% to the swap bank for Libor.

Alpha is going to borrow at 6% at the capital market.

Question

Suppose firm Alpha can borrow either at 6% or Libor + 1% and firm Beta borrow either at 8% or Libor + 2%. Assume that there is a swap bank who is willing to distribute any benefit by keeping 1/5th to itself, and 2/5th each to Alpha and Beta. Which of the following is false based on the above information?

Alpha is going to receive 5.8% from the swap bank for Libor.

Betas borrowing net borrowing rate is 7.6% after the swap arrangement.

Beta is going to pay 5.6% to the swap bank for Libor.

Alpha is going to borrow at 6% at the capital market.

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Question

Suppose firm Alpha can borrow either at 6% or Libor + 1% and firm Beta borrow either at 8% or Libor + 2%. Assume that

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