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There are 3 companies with different credit ratings and different offers for fixed and variable rates. Company A has the offers of 4% for
There are 3 companies with different credit ratings and different offers for fixed and variable rates. Company A has the offers of 4% for fixed and LIBOR+1% for variable rate. Company B offers are 7% for fixed and LIBOR +3% for variable rate. And finally, Company C offers are 6% for fixed and LIBOR+2% for variable rates. a) Which two of the three companies are more likely to come together for a swap agreement and why? b) Design the total cash flow table (both swap and outside debt) of a 2-year swap agreement with semiannual installments for one of the companies. (The LIBOR rates are: current 3%, 6 months 5%, 12 months 4%, 18 months 6% and 24 months is 6% too) (the principal amount will be the last 2 digits of your student number: for example, if it is 12 then the amount 12 million $, if 07 then 7 million $, if 00 then 1 million $)
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