Swaps

Carter Enterprises can issue floating$-$rate debt at LIBOR $+1\%$ or fixed$-$rate debt at $9\%.$ Brence Manufacturing can issue

floating$-$rate debt at LIBOR $+3\mathrm{.}0\%$ or fixed$-$rate debt at $12\%.$ Suppose Carter issues floating$-$rate debt and Brence

issues fixed$-$rate debt. They are considering a swap in which Carter makes a fixed$-$rate payment of $8\mathrm{.}60\%$ to Brence and

Brence makes a payment of LIBOR to Carter. What are the net payments of Carter and Brence if they engage in the

swap? Round your answers to two decimal places. Use a minus sign to enter negative values, if any.

Net payment of Carter:

$\%$

Net payment of Brence: $-($LIBOR $+$

$\%)$

Would Carter be better off if it issued fixed$-$rate debt or if it issued floating$-$rate debt and engaged in the swap?

The swap is good for Carter, if it issued

Would Brence be better off if it issued floating$-$rate debt or if it issued fixed$-$rate debt and engaged in the swap?

The swap is good for Brence, if it issued