Advantage of the other party comparative advantage

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Two parties wish to enter into a direct swap to take advantage of the other party's comparative advantage.

• Party A wishes to borrow at a fixed rate, but if it went into the market, it could borrow fixed at 13.50%.

However, if it borrowed floating, it could borrow at BBSW + 3.95%

• Party B wishes to borrow floating, and if it did so, it could borrow at BBSW + 2.85%.

However, if it borrowed fixed, it could borrow at 8.85%

• Describe the transaction which will maximise the benefit for both parties

Reference no: EM132538902

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