Question
Two companies, A and B, have the following borrowing rates: Fixed Borrowing: 4.2% for A; 5.6% for B Floating Borrowing: LIBOR+80 bps for A; LIBOR+120
Two companies, A and B, have the following borrowing rates:
Fixed Borrowing: 4.2% for A; 5.6% for B
Floating Borrowing: LIBOR+80 bps for A; LIBOR+120 bps for B
The two companies want to borrow in the markets that they do not have a comparative advantage. According to the comparative advantage argument, if B borrows in the market that it has a comparative advantage, what is the borrowing rate of B?
| A. | LIBOR+80 bps | |
| B. | LIBOR+120 bps | |
| C. | 5.6% | |
| D. | 4.2% |
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Focus On Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert Hughes
3rd Edition
0073382426, 9780073382425
