Swaps

Carter Enterprises can issue floating-rate debt at LIBOR + 2% or fixed-rate debt at 9%. Brence Manufacturing can issue floating-rate debt at LIBOR + 2.1% or fixed-rate debt at 11%. 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 8.50% 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 ________ .