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Suppose that a firm A can borrow fixed at 9%, and floating at Libor + 2%. Suppose firm B can borrow fixed at 12%, and
Suppose that a firm A can borrow fixed at 9%, and floating at Libor + 2%. Suppose firm B can borrow fixed at 12%, and floating at Libor + 4%. If firm A and B both borrows in the market that gives them a comparative advantage, and firm A pays firm B Libor + 4, what does firm B net?
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