Two firms X and Y are able to borrow funds as follows: (a) Firm X: Fixed-rate funding

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Two firms X and Y are able to borrow funds as follows: (a) Firm X: Fixed-rate funding at 4% and floating rate at Libor1%. (b) Firm Y: Fixed-rate funding at 7% and floating rate at Libor+1%. Show how these two firms can both obtain cheaper financing using a swap. What swap would you suggest to the two firms if you were unbiased advisor?

Posted Date: Jun 06, 2024 07:04 PM

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Two firms X and Y are able to borrow funds as follows: (a) Firm X: Fixed-rate funding

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