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X=2 4. Company A and Company B can borrow according to the rates mentioned in the table below. Company A prefers to borrow by floating
X=2
4. Company A and Company B can borrow according to the rates mentioned in the table below. Company A prefers to borrow by floating rate. On the other hand, Company B prefers to borrow by fixed rate. How can these two companies make a swap agreement by using an intermediary bank? After the swap agreement, what would be their ending borrowing rates? Assume that the intermediary bank, Company A and Company B will have equal absolute value of profit from the agreement. (25 pts) A B Fixed rate 12% 1x% Floating rate LIBOR +3.5% LIBOR + 3%Step by Step Solution
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