Completes and loan payments starts for both companies

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Reference no: EM131454305

Companies A and B have the following rates available to them from their repeactive banks:

Fixed Variable

A 8.75 L+1.5

B 7.3 L+0.75

Currently A is currently paying a loan rate of L+1.5, but really would like to have a fixed rate loan beacuse the CFO is more comforable with a fixed rate, and he thinks that flowating rates will rise in the furture, Company B is currently oaying a fiexed rate of 7.3 on a loan, but would like years. The loan principle for both companies is $10,000,000.

The 2 companies arrange through an intermediary banks a swap whereby CO.A will pay Co.B a fixed rate of7.5%, while Co.B will pay Co.A L+0.5

Show the net results of these transactions after all negotiations are completes and loan payments starts for both companies.

Reference no: EM131454305

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