Fixed-rate loan

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Please help with the below question :

1) Swap: Companies A & B have been offered the following rates per annum on a €20 million 10-year loan from their banks:

Fixed Rate Floating Rate

Company A 4% Libor +500 bps

Company B 6% Libor + 600 bps

Company A requires a floating rate loan; Company B requires a fixed-rate loan. Design a swap that will net a bank as intermediary 0.2% per annum and that will appear equally attractive to both companies (the gain by engaging in the swap will be split evenly between the 2 companies).

Reference no: EM131579032

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