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Question Help Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Luvia would prefer the flexibility of floating-rate
Question Help Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Luvia would prefer the flexibility of floating-rate borrowing while Paraguas wants the security of fond-rate borrowing Lluvia is the more creditworthy company They face the following rate structure. Lluvia, with the better credit rating, has lower borrowing costs in both types of borrowing Luvas floating-rate debt, so it could borrow at LIBOR 1000%. However, it could borrow fixed at 9.500% and swap for outing-rate dobt Paraguas was fixed rate debt, so it could borrow fixed at 1500 However, could borrow Hosting at LIBOR-2000% and swap for foredrate debt. What should they do? (LIBOR I 6.500%) Law's comparative advantagens (Round to three decimal places Let interest after a swap with Paraguas > (Round to three decimal place) Paragua's net interest for a swap with Lluvia (Round to three decimal places.) Llu's savings on borowing versus net wapi (Round to three decimal places) Paraguas's savings on borrowing versus net wapis * (Round to three decimal places) Therefore, Luvia should borrow at the rate and Paraguas should borrow at the rate Select from the crop-down menus
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