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Determine x borrowing rate

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PART A: Company X can borrow at a fixed rate of 8 per cent per annum or at a floating rate of BBSW + 0.5 per cent per annum. Company Y can borrow at 10 per cent per annum or at BBSW + 1.6 per cent per annum. The companies borrow and enter into a swap where Y pays X at 9.5 per cent per annum and X pays Y at BBSW +1.6 per cent per annum. Determine X's borrowing rate.

PART B: A trader expects interest rates to increase. Rather than take a position in the bond market, the trader decides to use interest rate swaps to carry out the trade. What position would a trader with this set of expectations take in the interest rate swaps market?

PART C: Credit Finance Ltd is restructuring its operations and has hired you as an advisor. Define "Leasing" and outline two advantages of leasing for the lessor and two advantages for the lessee.

Reference no: EM133121923

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