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The following table shows the borrowing capability of Firm X and Firm Y. BORROWER FIXED RATE (per annum) VARIABLE RATE (per annum) X 7.30% BBSW
The following table shows the borrowing capability of Firm X and Firm Y.
BORROWER | FIXED RATE (per annum) | VARIABLE RATE (per annum) |
X | 7.30% | BBSW + 0.55% |
Y | 9.90% | BBSW + 1.95% |
Determine whether a profitable swap could be arranged. In your answer, calculate comparative advantages and show the net borrowing differential that may be gained and shared between Firm X and Firm Y.
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