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Swaps) Suppose both A and B want to borrow $50 million for 10 years. A would like to borrow floating rate and B would like
Swaps) Suppose both A and B want to borrow $50 million for 10 years. A would like to borrow floating rate and B would like to borrow fixed rate. There were quoted the following rate: Fixed 7% p.a. Floating LIBOR + 0.2% LIBOR + 1.0% A B 8% p.a. How we create swap contract with 1) benefits of A and are equal (6.9%) 2) benefit of A more than 3 times of benefit of B (6.95%) 3) dealer needs 0.05% for fee (6.875%,6.925%)
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